Understanding the Scottish economy

Director of the Fraser of Allander Institute Dr Graeme Roy explains why, at a crucial time for the Scottish economy, business needs to get to grips with how the Scottish economy works.

The next few years promise to be a crucial time for the Scottish economy. And business owners need to take steps now to better understand how key changes will impact on their own strategies and business models.

The last ten years have been a challenging time for the Scottish (and UK) economy. The financial crisis brought about the deepest recession since the 1920s. Scotland’s recovery has been hampered by the recent decline in oil and gas, with economic growth still fragile at best.

But it’s important not to lose sight of the fact that Scotland has a rich and prosperous economy.

We’re in the OECD top 20 in terms of income per head and we consistently rank near the top in the UK on most long-term economic indicators. We have substantial natural resources, world class universities and a highly skilled workforce.

And we have key strengths in sectors such as food and drink, energy and tourism plus Scottish companies competing at the highest level in photonics, technology, precision manufacturing and financial services.

Our economy has changed markedly over the last decade, and the next decade promises to be even more eventful.

Brexit has the potential to fundamentally alter our economic relationship with our largest trading partner and major source of external demand.

But at the same time, the rapid growth of emerging markets – in Asia, South America and Africa – provide enormous potential for new demand and growth. But moving in to such markets is not easy and businesses need to adopt flexible, dynamic and patient strategies to navigate their way through new - and quite often challenging - markets.

If the last two decades have been dominated by a move toward globalisation, the next 20 will be dominated by the exponential rise in technology.

The prospects of a 4th industrial revolution marked by breakthroughs in technology create massive opportunities for Scottish businesses. The commercial possibilities of billions of people connected by mobile devices, with unprecedented processing power and access to knowledge, are unprecedented. Indeed many day-to-day economic activities – from how we book and enjoy our holidays through to how financial services are delivered – are already being transformed by technological change. 

But rapid technological change carries the risk that it may widen inequalities in our society. The concept of ‘inclusive growth’ has quite rightly gained traction in recent years. Most people will agree that the benefits of economic prosperity should be shared across society. But we also know that – as a country – we will only be able to achieve our full potential if we harness the resources and talents of everyone.

Such issues will shape the environment that businesses in Scotland will operate in the years ahead.

To help you make sense of all of this, we’re running a 1 day CPD course ‘Understanding the Scottish Economy’ on the 28th November.  The course requires no background in economics.  We hope to see you there.

Please click here for full details of the one day course.

About Graeme Roy

Professor Graeme Roy is the Director of the Fraser of Allander Institute. His previous role was with the Scottish Government where he was a Senior Economic Adviser and head of the First Minister’s Policy Unit. Graeme has responsibility for the overall strategy and outputs of the Institute.