Ally Scott, EY Scotland Managing Partner commented: “Although economic growth has been relatively flat, Scotland is slowly moving in the right direction with a brighter outlook expected for sectors such as information and communication, energy, and consumer-facing services. That said, there has been a softening in investor sentiment and challenges noted in the labour market, with employment growth remaining low and lagging the UK.
“In what is already a constrained labour market in Scotland, the incremental increases in income tax have created a meaningful tax cross-border divide, which includes a significant number of NHS professionals, senior teachers and other civil servants. This is now a major concern for employers in Scotland looking to retain talent in an already tight skilled labour market. If these growth sectors hold the careers of the future for Scotland, then we need an environment that encourages investment and promotes business, not one that creates barriers for growth or impacts competitiveness.”
Sue Dawe, EY Scotland Managing Partner for Financial Services said: “The outlook for the remainder of 2024 is somewhat a mixed picture for Scotland, but we do need to consider the longer-term access to a skilled workforce, both in terms of attracting and retaining talent. The new Scottish Financial Services sector growth strategy demonstrates that maximising the potential of this long-established industry for modern times requires a skilled workforce for us to compete on an international stage.
“Financial Services is crucial to a balanced economic growth trajectory in Scotland, supporting emerging technology sectors and the green energy transition. But we need to incentivise our people to stay in Scotland and push for others to see Scotland as a place to build a successful career, rewarding life and, of course, contribute to a thriving, just, local economy.”
Business activity and sentiment
The latest PMI Scotland Business Activity Index remained in contractionary territory at 49.4 in December, an improvement on 47.1 reported in November, but again lagging the UK at 52.1. December’s Scottish Government Business Insights and Conditions Survey shows that the main concerns for firms were inflation in goods and services prices (16.6%), followed closely by falling demand for goods and services (16.3%). Energy prices, whilst still a significant concern for 14.6% of businesses, fell to third place having previously been the primary concern among businesses in the last quarter.
The BICS survey also found that a larger proportion of businesses reported a fall in turnover (24.4%) than businesses reporting an increase in turnover (17.2%) in November compared with October. The results by sector suggest that the accommodation and food services and administrative and support services are most likely to have experienced weak activity at the close of the year. Yet, the EY ITEM Club reports that we can expect green shoots of growth in these sectors as we enter 2025.