Aberdeen is set to face thousands more job losses in the coming years while Inverness is on track for employment growth, a new report has found.
The Granite City will continue to be impacted by the oil and gas slump, with 4,000 jobs expected to be lost between 2016 and 2019, according to the EY Scottish Item Club Forecast.
The firm said that total employment is predicted to fall by 1.6% in 2016 but noted that unemployment in the city has only risen marginally since the summer.
The firm also predicted that Aberdeen is set to seen GVA growth of 0.8% in the next three years, falling short of both Scotland and UK average growth in the same period.
Derek Leith, EY Senior partner, Aberdeen, said: “It will come as no surprise that the short term economic outlook for Aberdeen is weaker than other Scottish cities.
“2015 and 2016 has seen the north east economy impacted by a significant oil price correction and the after effects of that will still be evident in the short term.”
But he said the recent uptick in oil prices and the £250million Aberdeen and Shire city region deal were cause for optimism.
“The stabilisation of the oil price in the range of US$45 to $50 per barrel and the massive price rebasing in the oilfield services sector has begun to restore confidence in the sector evidenced by increases in deal activity,” he said.
“The recently completed city deal and renewed focus on diversifying the local economy, as well as ongoing infrastructure spending, are reasons for us to be optimistic about the long term prospects for the local economy.”
Meanwhile, Inverness is expected to enjoy higher employment driven by the professional, scientific & technical services sector although GVA for the city is expected to perform just below the Scottish average – 0.9% compared to Scotland’s 1%.
Overall, EY said the growth of Scotland’s economy will be much slower over the next couple of years as existing headwinds are compounded by political and economic uncertainty.
The report predicts Scottish output growth for 2016 to be 0.7% and forecasts 0.4% for 2017. This compares with UK GDP growth rates of 1.9% and 0.8% respectively.
Modest growth is expected to return from 2018 but the future outlook will depend on the economic landscape as shaped by Brexit, potential policy changes brought by a Trump presidency and the implementation of extended powers to the Scottish Government over tax and revenue spend, EY said.
Consumer spending and investment drove the expansion of nominal GDP from mid-2015 but these “bright spots” of economic growth have faded, EY said. With the saving ratio dropping to a record low and personal disposable income to drop 0.1% next year, consumer expenditure will be unable to buoy economic growth and business investment will suffer from the politically-driven uncertainties.
The recent fall in the value of the pound has led to a pick-up in manufacturing exports orders but the downside of the currency depreciation will show through in 2017 as rising import prices hit both business costs and consumers’ pockets.
Dougie Adams, senior economic advisor to the EY Scottish Item Club said: “During the last 12 months Scottish growth has been challenged by various economic factors. The unsustainable growth from the construction sector has waned as expected and the impact of low oil prices continues to reverberate through the economy.
“A few sectors performed well in the first half of the year resulting in patchy growth with private services delivering the strongest performance at 2.6%, just shy of the UK’s level of 3%. Although manufacturing output as a whole fell by 3.6% the food and drink sub-sector surged by 9%.”