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Scotland's economic commentary

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Scotland's economic commentary

Our bi-monthly update on global, UK and Scottish economic trends and performance, drawn from a wide range of economic indicators and commentaries. Published April 2019.

Trade tensions and falling confidence hitting global growth

Forecasts have been revised downwards in almost all major economies, with particularly large revisions for the euro area for both 2019 and 2020.

Main factors contributing to the slowdown 
  • A potential disorderly Brexit
  • Potential further US-China trade barriers, and
  • Ongoing erosion of business and consumer confidence 

Global economic trends

  • The OECD cut its forecast for global economic growth to 3.3% in 2019
  • The IMF is also forecasting global growth to slow to 3.3% in 2019
  • The US economy created 196,000 new jobs
  • China's economy is expected to grow by over 6% in 2019, with slower growth in 2020
  • The eurozone economy slowed sharply through 2018, with weak growth forecast

 

Growth forecasts (%)

 

OECD

IMF

 

2019

2020

2019

2020

World

3.3

3.4

3.3

3.6

United States

2.6

2.2

2.3

1.9

Euro area

1.0

1.2

1.3

1.5

China

6.2

6.0

6.3

6.1

Japan

0.8

0.7

1.0

0.5

United Kingdom

0.8

0.8

1.2

1.4

 

Table 1 showing global economic growth forecasts. Sources: OECD Economic Outlook, March 2019IMF World Economic Outlook, April 2019

 

UK economic trends

  • Forecast UK growth has been significantly revised down
  • The UK economy grew by 0.3% in the three months to February
  • Business confidence recovered partially in March

Scottish economic trends

  • Scotland's economy grew by 0.3% in Q4 2018
  • Economic growth in Scotland remains below trend
  • Activity in Scotland's private sector fell in March for the fourth consecutive month

What our customers tell us

We regularly seek feedback on current performance and expectations from our account managed companies.

Feedback was received from approximately 350 companies between 1 January and 31 March 2019.

Turnover, profitability, employment and export performance over the last six months were strong.

AM Company performance over the last six months

Figure 1 showing company performance over the last six months (% of companies)

Companies also expect strong performance over the next six months.

AM Company performance over the next six months

Figure 2 showing company performance over the next six months (% of companies)

Turnover and profitability performance are around the same as 12 months ago. Expectations for exports are down on this time last year, possibly linked to ongoing uncertainty including Brexit.

What all this means for Scottish Enterprise and Scottish businesses

The US is the leading destination market for Scottish goods and services. Recent tax cuts have increased spending on imports, which is good news for Scottish exporters.

Business surveys reported an increase in eurozone service sector activity in March. However, manufacturers recorded the biggest monthly fall in output in almost six years. As the euro area is one of Scotland’s biggest markets, this will be of some concern to exporters.

The labour market is performing strongly, however overall economic growth is fairly slow and business surveys are varied. A strong labour market and real pay growth is expected to support domestic demand and consumption this year. 

However, the global outlook remains subdued and the business environment will remain challenging for exporters. Stockpiling of goods by manufacturers could lead to cash flow issues for some businesses, and reduced future demand, as stockpiles are wound down.

Disclaimer

We release Scotland's economic commentary bi-monthly. This commentary reflects our understanding of issues at the time of writing drawn from a wide range of credible and respected sources and should not be taken as Scottish Enterprise policy.

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