Brexit uncertainty hitting business in Scotland, finds PwC

Housing - image credit: Fotolia

Ongoing political and economic uncertainty caused by Brexit is hitting business in Scotland, according to a new report from PwC.

In a new report the business adviser found that although economic growth held up better than expected in the six months following the Brexit vote, it slowed in the first half of 2017 as inflation rose sharply.

PwC projected Scotland would see 1.2 per cent growth in 2017 and 1.1 per cent in 2018 - behind UK GDP growth of 1.5 per cent in 2017 and 1.4 per cent in 2018.

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But while GDP increased in Scotland between 2016 and 2017, housing transactions felt the effects of Brexit uncertainty, with year-on-year transactions down for twelve consecutive months.

PwC reported businesses were being forced to make contingency plans for possible outcomes when the UK leaves the EU.

Consumer spending growth is expected to continue to be “moderate” in 2017-18 as inflation eats into real spending power and wage growth remains subdued despite record employment rates.

Meanwhile, with uncertainty continuing, PwC found four Scottish areas have experienced the highest price decline in house prices when compared to UK counterparts.

Lindsay Gardiner, regional chair for PwC in Scotland, said: “While some may see concern at the fact Scotland and Northern Ireland are at the bottom in terms of GDP improvement, there is actually very little separating most of the UK. This year the best growth we expect any region - except for London - will see is 1.5 per cent and it is 1.4 per cent next year.

“Where concerns should perhaps be focused is around wage growth as many are offsetting limited growth through increased borrowing - which may have a longer term impact via interest rate rises or employment downturn.

“It’s too early to speculate on how the Brexit talks are going to impact growth, however current exchange rates have some offsetting benefits for net exports.

“The main message we are discussing with businesses at the moment is to consider where Brexit may have an impact and to make contingency plans for a number of scenarios, particularly those who may face changes in customs tarrifs or employment challenges.”