An ailing oil and gas industry has forced experts to lower their expectations for economic growth across the whole of Scotland during 2015.
Brian Ashcroft, emeritus professor of economics at Strathclyde University said yesterday the downturn offshore was stifling onshore service businesses throughout the country.
He was speaking after the university’s Fraser of Allander Institute – an economic think-tank – delivered its latest commentary on the state of Scotland’s finances.
The report included a significant downward revision in the prediction for gross domestic product GDP growth this year.
Its authors are now expecting growth of 1.9%, a 0.6% drop from their June forecast.
A slight improvement to 2.2% is expected in 2016, with the think-tank forecasting 2.5% growth the year after.
Fraser of Allander’s projections highlight a marked divergence in Scotland from the rest of the UK, despite a boost to the economy from infrastructure spending north of the border.
The report, sponsored by professional services firm PwC, said growth was slowing across the UK but there was evidence of an “absolute and relative” (to the UK) bigger slowdown in Scotland.
Further austerity measures planned by the UK Government and continuing high levels of household debt could further hamper recovery north of the border, it added.
Prof Ashcroft said: “With growth slowing right across the UK and especially in Scotland, now is the time for the chancellor to rethink his cuts to tax credits and for the Bank of England to continue to hold (interest) rates.
“Scotland’s weak productivity and poor export performance necessitates that the Scottish Government tackle these issues more directly if it is to raise the long-term growth rate of Scotland’s economy.”
Paul Brewer, PwC government and public sector leader in Scotland, said:
“We are also seeing the effects of the low oil price manifesting themselves across other onshore sectors from engineering to hospitality.
“This is no longer the preserve of the oil and gas industry. Indeed, our latest UK hotel report noted a double-digit fall in occupancy levels and revenue per room across Aberdeen in the year to July 2015.”
Mr Brewer added: “With oversupply in the oil market looking likely to continue in the medium-term, it’s crucial that the oil and gas industry swiftly adjusts to this ‘lower for longer’ scenario, working closely with the regulator and government to protect the long-term future of Aberdeen as a global hub.”