KPMG calls for focus on Scotland’s productivity to build resilience in face of no deal fears

Fraser of Allander’s latest economic commentary, yesterday’s Scottish Fiscal Commission (SFC) figures and KPMG’s Economic Outlook report, all suggest Scotland’s economy will continue to grow, albeit at a low rate, if the UK strikes a deal with the EU.

Fraser of Allander’s commentary has forecast growth in Scotland will reach 1.4 per cent in 2019 in the event of a deal, while the SFC, which previously predicted growth of less than 1 per cent through to 2020, revealed higher figures of 1.2 per cent for 2019.

KPMG’s report additionally highlighted a strong housing market in Scotland and high levels of employment and low levels of unemployment.

However, there is growing concern that business investment across the UK declined for the third consecutive quarter according to KPMG’s findings. Specifically, a deterioration of investment intentions in several sectors is putting increased productivity, the development of skills and overall economic performance, at risk.

Some of Scotland’s key trading partners in Europe are slowing, with output in the Euro Area increasing by just 0.2 per cent over the summer – a four year low according to the Fraser of Allander analysis.

Catherine Burnet, senior partner for KPMG in Scotland, said: “Given the subdued economic forecasts and the uncertainty around the Brexit outcome, it is vital that we look beyond a Brexit deal. There is still much to be done to stimulate growth in the Scottish economy, including investment in skills, exporting and increasing productivity, and while Scotland has done well to close the productivity gap with the rest of the UK, it remains behind compared to international standards.

“Many businesses are finding it harder to recruit and to increase productivity, so there should continue to be a focus on providing meaningful growth opportunities to employees through upskilling.

“A particular emphasis should be placed on enhancing digital skills and the adoption of technology in the workforce, and further improving attainment in numeracy, literacy and STEM skills in schools continues to be of great importance in improving Scotland’s productivity.

“While export growth recovered in the third quarter across the UK, it is too early to tell if this improved performance will continue post-Brexit. However, there remains significant opportunity to increase Scottish exporting and we continue to support the positive work the Scottish Government and the CBI are doing in this area.

“For Scotland’s economy to thrive post-Brexit, it is abundantly clear businesses must work in tandem with the Scottish and UK governments in order to effectively improve GDP growth. KPMG is committed to working with organisations across all sectors to help identify and influence those factors, such as improving exporting, upskilling and increasing productivity, which support this ambition.”