EY Scottish Item Club upgrades economic growth forecast

Ironworks The item club predicts 45,000 new jobs will be created in Scotland this year

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Scotland is set to enjoy its best year for economic growth since the financial crisis, according to a leading economic forecaster.

The EY Scottish Item Club predicted a rise in employment and house prices.

It raised its growth forecast for the Scottish economy to 2.4% this year - 0.7% higher than its previous prediction in December.

But it warned that September's referendum carried risks for the economy - whatever the result.

The item club's latest summer update predicted substantial growth this year and further growth of 1.9% in 2015 and 2016.

However, it forecast UK growth would be 0.5% higher than Scotland's in both 2014 and 2015.

The group said that was due partly to the relative size of Scotland's public sector and lower population growth.

The item club also predicted 45,000 new jobs would be created in Scotland this year, and 33,000 in 2015.

But it suggested it could take until 2018 before Scotland's employment rate returned to the levels seen before the financial crisis.

House prices

Average house prices in Scotland are predicted to rise by nearly 7% this year and 5% in 2015, "after a period of stasis".

According to its prediction, the average price in Scotland is likely to be about 67% of the UK average in 2015.

Dougie Adams, senior economic advisor to the item club, said: "This year is shaping up to be the best for Scottish economic growth since the onset of the financial crisis, with business investments and exports adding momentum to the consumer-driven recovery.

"A handful of sectors including transport, food services and retail are expected to create employment while public administration and manufacturing shed jobs.

"We expect financial services, education and health to tread water."

'Home-grown risks'

The forecaster warned that its predictions were subject to "international and home-grown risks", including the impact of September's independence referendum.

It argued that a Yes vote would bring uncertainty for business on key economic issues such as the currency and Scotland's place in Europe.

But it also warned that a No vote would bring the Scottish Parliament more tax powers than it has ever had - and that could change the UK's economic landscape.

Mr Adams added: "Both sides of the debate have produced anecdotes galore, but available data doesn't provide any significant signals of the economic impact from uncertainty engendered by the referendum."

"Some businesses may be adopting a short-term 'wait and see' approach to big decisions about investment.

"While a Yes vote would usher in an inevitable period of uncertainty, the likely transfer of further powers following a No vote would also mean that the impact of constitutional change would remain on the business agenda."

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