The rebounding North Sea oil and gas industry is expected to fuel “slightly stronger” economic growth in the Scottish economy this year, according to a new study.
The Scottish Government’s State of the Economy report, published yesterday, outlines a “mixed picture” of forecasts and describes 2018 as a “pivotal” year for the economy.
GDP growth for 2017 is predicted to be between 0.7% and 1.3%, with this year expected to be similar but marginally better, at between 0.7% to 1.4%.
The range in the forecast was said by Scotland’s chief economist Gary Gillespie to be “notably wider” than in recent years, reflecting the “uncertainty of post EU access conditions in relation to trade, services, investment and skills”.
Growth last year, which slowed to just 0.2% in Scotland in the third quarter compared to 0.4% across the UK, was said to have been boosted by a “more positive” outlook for the oil and gas sector.
Mr Gillespie said: “Confidence is continuing to slowly return to the industry following efficiency and structural changes in the sector in recent years while the 27% increase in the oil price over the past year has supported turnover.”
His report also highlighted the strong labour market, with employment rates remaining close to the record high of 75.8% achieved in May to July.
It concluded: “The forthcoming year will be a pivotal year for the Scottish economy as the outlook improves relative to 2017, reflecting a stronger external environment alongside a more positive outlook for oil and gas and related production activities.
“The latter should help drive productivity growth as the labour market remains tight.
“However, risks relating to business and consumer confidence remain, which are impacting expenditure and investment in the economy.”
Economy Secretary Keith Brown said: “While growth has been more modest than we would have liked, we’ve seen growth in the services sector and a welcome return to growth in the production sector, which continues to be supported by the pick-up in economic sentiment in the oil and gas sector.”
However, the Scottish Conservatives claimed this week that the nation’s economy had “under-performed the rest of the UK for the entire decade that the SNP has been in power, at a cost of £16.5billion”.
Mike Tholen, upstream policy director for industry body Oil & Gas UK, said £5.5billion of new capital projects could be approved for the North Sea this year – the most since 2013.
“We welcome the Scottish Government’s 2018 State of the Economy report which confirms the key role the oil and gas sector will continue to play in supporting the growth of Scotland’s economy,” he added.
“With up to 20 billion barrels of oil and gas still to recover from the UK Continental Shelf, industry is well placed to provide an indigenous resource to help meet energy need, whilst supporting hundreds of thousands of jobs across the UK.”
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