Scotland's economy should return to positive growth in 2010 with the central forecast showing GVA 0.6% - a 0.5% rise from the November 2009 forecast - and growing to 2.2% by 2012, according to the latest Fraser of Allander Economic Commentary, supported by PricewaterhouseCoopers LLP (PwC).
Professor of Economics at Strathclyde Business School, Brian Ashcroft said:
"A weak recovery for the Scottish economy is in prospect, supported by a gradual improvement in the growth in exports and investment. But, given relatively flat household and corporate spending, the ending of quantitative easing this month, and the likely continuing sluggishness of bank lending, the prospect of a further fiscal tightening in 2010, all Prof. Brian Ashcroftincrease the risk of a double-dip recession later this year and perhaps next."
Over the next few years significant public expenditure cuts are planned by the UK Government. These will impact on Scottish public spending including local government. Paul Brewer, senior partner of PricewaterhouseCoopers LLP's Edinburgh office outlined the consequences for local authorities:
"Councils need to reduce their costs by around 25 per cent over the next few years to help address their funding constraints. However, finding successful solutions that maintain services at the level their electorate expects will be exceptionally challenging.
"Much of local authority spending is locked in for significant periods, for example pension liabilities, Private Public Partnership arrangements and statutory obligations, effectively tying their hands. This inevitably means that the solution will involve significant restructuring and potentially sharing of activities such as back office and support functions in order to minimise any reduction in the range and extent of services."
While the Scottish economy is clearly in a better position that it was a year ago, it is crucial that businesses do not lose focus, as Bruce Cartwright, head of business recovery services at PricewaterhouseCoopers LLP in Scotland explained:
"Traditionally, we see more businesses failing coming out of recession than on entering which is why we advocate that cash management should remain top of most business agendas. Business leaders need to maintain a focus on cutting back costs and driving revenues back up as well as planning for the longer term, identifying ways in which they can maximise on opportunities as we exit recession. Companies and their advisors should also not underestimate the importance of honest dialogue with stakeholders."