Stockpiling would ‘ultimately have a negative impact on Scottish GDP’

23 Oct 18

The stockpiling of goods by firms ahead of Brexit could provide a short term fillip to the Scottish economy, according to the Scottish Government’s chief economist.

It would be more than offset by a slowing down of output in subsequent quarters, Gary Gillespie said in his State of the Economy report out today.

The chief economist calculated additional inventory accumulation in 2018-19 could boost the growth rate of Scottish GDP by up to 0.4%.

However, this would be at the expense of growth in 2019-20, when business investment would fall as companies allowed their inventories to unwind, he said.

Over the next four years, stockpiling would have a negative impact on Scottish GDP growth and this was likely to manifest itself in greater volatility in economic data over the remainder of this financial year.

“With less than six months to go before the UK leaves the EU, Brexit remains the key downside risk to Scotland’s economic outlook,” said Dr Gillespie.

The extent to which any UK agreement on Brexit would lead to “an orderly transition” remained unclear, he added, warning that a significant fall in household consumption and confidence would have a “material impact” on the economy.

The latest GDP figures, published last month, showed the Scottish economy outstripping that of the UK as a whole, growing 0.5% in the second quarter of this year.

The new analysis attributes the improved performance to growth in exports, both in the oil and gas sector and onshore.

The stronger outlook for offshore activity, along with the rise in the price of oil, had provided a boost in confidence to the wider economy, it said.

Stronger output had also been reflected in Scotland’s labour market, with the latest data showing unemployment remaining close to record lows, which should drive up wage growth, said the report. 

The analysis of Scotland’s economic performance was welcomed by economy secretary Derek Mackay.

“With Scotland’s economy continuing to grow throughout the year, it’s good to see the improving outlook for the oil and gas sector coming to fruition alongside the continued strong performance in our labour market,” he said.

“Scotland’s economy is strong, and we are one of the top destinations for inward investment, whilst Scottish productivity has grown faster than the UK’s over the past decade.

“We are using the powers we have to boost the economy and ensure our economic potential is realised at the same time as we try to mitigate the damage Brexit will cause.”

But Scottish Conservative shadow economy secretary Dean Lockhart accused the SNP government of “relentless Brexit-related scaremongering”.

“[The] SNP government…is refusing to examine the opportunities of leaving the European Union, and using it only to spread doom and rabble-rous[ing] for independence,” he said.

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