Scotland's growth forecast downgraded as economy 'falters'

There are signs of “faltering” growth in the Scottish economy, with companies delaying or cancelling investment amid high-interest rates, according to new research.

The latest quarterly economic commentary from economists at the Fraser of Allander Institute says growth is likely to be muted.

It forecasts GDP growth of just 0.2% this year, a downwards revision from the institute’s previous assessment.

Growth is forecast at 0.7% in 2024 and 1.2% in 2025.

The researchers said the high interest rate and high inflationary environment is likely to persist for longer than initially thought.

Professor Mairi Spowage, director of the institute, said: “Growth in 2023 so far has presented a pretty mixed picture, while much better than we were expecting at the end of 2022 – with the predictions of recession proving thankfully unfounded.

“Despite this though, it is clear that businesses are not feeling that conditions are great right now, with many delaying or cancelling investment due to the high interest rate environment and wider economic uncertainty.”

The quarterly economic commentary is sponsored by Deloitte.

The company’s senior partner for Scotland, Angela Mitchell, said: “This quarter’s commentary shows a thoroughly mixed outlook for our economy and, accordingly, for business and consumers.

“Notably, the rate at which businesses are delaying or cancelling investments is high.

“This chimes with findings from our latest CFO (chief financial officer) survey, which found CFOs are focused on reducing leverage and capital expenditure is seen as a low priority.

“However, the commentary encouragingly notes that there are signs that the investment hesitation is only temporary.”