Scotland’s economy has outperformed rest of UK post-pandemic, expert says

Speaking to the BBC’s Sunday Show, David Phillips, head of devolved and local government finance at the IFS, said Scotland was one of the most well-off regions of the UK, outperforming Wales and Northern Ireland as well as the north of England and the midlands.

When it comes to economic growth, he added that on a per person basis, Scotland’s economy has been performing better than the rest of the UK since the pandemic.

Phillips said: “Scotland is one of the more better off regions of the UK. It’s behind London and the south east of England, but its well ahead of the midlands and north of England, not to mention Wales and Northern Ireland.

“Scotland’s got a broad-based economy, a relatively well-educated workforce, and of course oil and gas and associated activity onshore do look much larger than they do in the rest of the UK.

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“I think looking at growth recently, Scotland has very slightly outperformed growth in the rest of the UK over the last few years.

“On a per person basis, Scotland’s economy is slightly larger than before the pandemic whilst in the rest of the UK it’s very slightly lower.”

He added this followed a period in the second half of the 2010s when Scotland’s economy was a bit weaker than the rest of the UK.

Last week a key survey by the Royal Bank of Scotland found Scotland was a “standout” performer among the UK nations and regions with its private sector economic growth in May accelerating the fastest pace in two years.

The latest PMI (purchasing manager’s index) showed that Scotland’s private sector growth in May was second-fastest among the UK’s 12 nations and regions, behind only Northern Ireland and ahead of London.

The acceleration of growth in Scotland contrasted with a slowing of expansion in the overall UK private sector economy last month.

Employment growth in Scotland was third-fastest among the UK nations and regions, behind only Northern Ireland and north-west England, accelerating in May to its fastest pace in three months.

Phillips said the fortunes of Scotland’s economy linked strongly to activity in the North Sea.

“When there’s growth in the oil and gas industry, Scotland’s economy tends to outperform a little bit compared to the rest of the UK. When it’s struggling, as it was between 2014 and 2021, Scotland’s economy tends to do a bit worse,” added Phillips.

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“That’s not because oil and gas is such a large share of the economy, but there’s a lot of activity between the north east of Scotland that still links up to that.”

When asked if Scotland’s economic growth was significant enough to make a difference to the economy though, Phillips was sceptical.

He said: “If you look back over the last five years, Scotland’s economy compared with 2019 is about 1.5% bigger per person. That’s growth of 0.3% per year.

“If you compare that to the growth we were used to in the 2000s, that’s very slow.”