Scottish GDP remains 1.3% below pre-pandemic level

Kate Forbes

In the three months to August, GDP is estimated to have grown by 2.6% compared to the previous three-month period.

This reflects a slowdown in growth during the third quarter so far, relative to the upwardly-revised growth of 5.6% in Quarter 2 (April to June) which was also published today in the GDP Quarterly National Accounts.

Output in the services sector grew by 0.2% in August, with increases in 11 of the 14 subsectors. In August, the largest positive contribution to growth was from accommodation and food services, offset by a drop this month in the health and social work subsector.

Output in the production sector contracted by 0.8% in August. There were falls in the three of the four subsectors, including a contraction of 2.6% in manufacturing output. Output in the construction sector is provisionally estimated to have grown by 0.2% in August.

The Scottish Government has struck a positive note about the figures, but financial experts are less convinced.

Finance Secretary Kate Forbes said: “Today’s figures provide further evidence of Scotland’s economic recovery, with output now just 1.3% below the pre-pandemic level of February 2020.

“It is encouraging to see such strong growth in accommodation and food services, where activity increased by 8.7% during August. These businesses were particularly badly hit by coronavirus restrictions and benefited from the move beyond Level 0 on 9 August, along with other consumer-facing sectors such as arts, recreation and culture. It is a tribute to their innovation and resilience that they are bouncing back so robustly.

“The pandemic is not over and challenges remain, but we are working hard to ensure Scotland emerges with a stronger, greener and fairer economy.”

Kevin Brown, savings specialist at Scottish Friendly, said: “The recovery in Scotland has all but stalled as the economy grew by just 0.1% in August after a -0.2% contraction in July.

“Scotland’s onshore GDP is yet to return to pre-pandemic levels and still lags the UK economy as a whole. The data from the first two months of Q3 also suggest a significant slowdown on the three months to June.

“This is bad news for the Scottish government but also for many households as sluggish economic growth is unlikely to help drive up wages. The rising cost of living is putting many more families under financial pressure and unless incomes rise then the situation is only going to get worse.

“The SNP suggested the UK government failed to do enough to help struggling families at last week’s budget and it’s important that it now takes action into its own hands.

“With more of its own money to spend thanks to a big increase in funding to the Scottish Government, there is an opportunity for the SNP to find ways to help ease the cost of living crisis in Scotland this winter.”