The outlook for Scotland’s budget in 2023-24 has undoubtedly been made more challenging due to factors wholly outwith the control of the Scottish Government, but there are decisions that Deputy First Minister John Swinney can make to ease the path ahead for Scotland, according to a report published yesterday by the Fraser of Allander Institute.
In its-pre Budget report, the University of Strathclyde-based Institute says that in the face of high inflation, the UK Government’s Autumn Statement provided some comfort with additional transfers that will more or less offset the impacts of inflation over the next two years.
The Scottish Government now needs to set out how it will use its significant devolved tax powers and whether to use them to generate more revenue for public services, including public sector workers.
The Resource Spending Review, published in May this year, provided a blueprint for spend over this parliament, but we have already seen deviations from planned spend in this financial year, and changing priorities may see further revisions when the draft Budget is set out on the 15 December.
The Fraser of Allander Institute’s annual pre-budget report, published today (12 December) examines the context to the budget and the key decisions facing the Scottish government in 2023-24.
Its findings include:
the economic situation has deteriorated markedly since the 2022-23 budget was presented, with high inflation set to eat away at living standards over the next two years.
the high inflation environment eroded the value of the Scottish Government’s budget in 2022-23 meaning that the present financial year’s budget is worth about £1bn less in real terms
Despite fears of cuts to the near-term budget, the announcements made by the UK Chancellor more or less offset the impacts of inflation on the Scottish budget in 2023-24 and 2024-25
the Scottish Government has significant devolved tax powers and therefore has decisions to make on Thursday about whether or not to use them to generate more revenue for public services.
Professor Mairi Spowage, Director of the Institute, said: “John Swinney is getting set to present his first budget in seven years, in what he has acknowledged is an unprecedentedly tricky time for the Scottish public finances.
“The challenges he has been dealing with for 2022-23 ease a bit for 2023-24: there was some additional money announced at the Autumn Statement which generated around a £1bn of consequentials, offsetting the inflationary pressures on the budget.
“But there are also flexibilities that the Deputy First Minister has for the next financial year that were not available to him for this year – the Scottish Government does have tax powers that could be used, if he wishes, to raise more revenue.”
Emma Congreve, Deputy Director, said: “In amongst all the headline-grabbing decisions, it will be important to take a step back to see how this Budget helps Scotland achieve its long term ambitions.
“We are expecting that the government will set out, clearly and transparently, the choices it has made and what the impact, both good and bad, will be for policy outcomes and the impacts on different groups.”
According to the latest Royal Bank of Scotland Report on Jobs survey, hiring activity fell across Scotland again in November amid greater economic uncertainty and strong cost pressures.
For the second month running, both permanent staff hires and temp billings fell, with the former recording the quickest reduction since June 2020. While staff availability continued to deteriorate, demand for labour expanded at a softer, but still strong rate.
The ongoing imbalance of labour demand and supply led to further rises in both starting salaries and short-temp pay.
Downturn in permanent placements gathers pace
For the second successive month, permanent placements fell across Scotland in November. The rate of reduction quickened from October to the fastest since the initial phase of the pandemic in June 2020 and was sharp overall. Increased market uncertainty and candidate shortages were blamed for the latest drop in permanent staff appointments.
Permanent placements also fell across the UK as a whole for the second month in a row, albeit at a softer pace than that seen in Scotland.
November data highlighted a fall in temp billings across Scotland for the second consecutive month. Adjusted for seasonality, the respective index pointed to a slower and modest pace of decrease. According to anecdotal evidence, concerns about the outlook weighed on labour market activity.
In contrast to the trend seen for Scotland, temp billings expanded modestly at the UK level.
Supply of permanent staff falls steeply in November
As has been the case since February 2021, the supply of permanent staff across Scotland contracted during November. Furthermore, the rate of deterioration was the most severe since May and among the fastest on record. Recruiters stated that a combination of labour and skill shortages, Brexit and economic uncertainty reduced the supply of candidates.
Notably, the downturn in permanent staff supply across Scotland outstripped the UK average for the eighth month in a row.
A twenty-first successive monthly fall in temporary candidates across Scotland was recorded during November. The rate of reduction accelerated on the month, and was the sharpest since June. The decline also exceeded that seen across the UK as a whole. Recruiters blamed the fall on a stronger preference for permanent roles, candidate shortages and economic uncertainty.
Upward pressure on starting salaries intensifies in November
Latest survey data signalled a further rise in salaries awarded to permanent new joiners in Scotland for the twenty-fourth successive month in November. The rate of pay inflation ticked up from October’s 16-month low, and was rapid overall. The latest rise in salaries was attributed to competition for labour amid staff and skill shortages.
For the second month running, Scotland noted a quicker rise in starting salaries than recorded at the UK level.
Average hourly wages increased further across Scotland in November, thereby stretching the current sequence of inflation to two years. The rate of pay growth accelerated from October’s 18-month low and was sharp overall. Scottish recruiters commonly noted that acute skill and candidate shortages continued to exert upward pressure on wages.
Further slowdown in growth of demand for permanent staff in November
November data pointed to another monthly increase in the number of permanent vacancies across Scotland, extending the current run of expansion that began in February 2021. That said, while growth remained strong, the rate of increase weakened to the second-slowest in the aforementioned sequence.
Across the monitored job categories, Nursing/Medical/Care reported the quickest rise in vacancies. Executive & Professional and Hotel & Catering reported reduced demand for permanent staff.
Recruiters across Scotland signalled a twenty-sixth successive monthly rise in temporary vacancies during November. However, the rate of expansion cooled since the previous month and was the softest seen since February 2021.
IT & Computing registered the quickest upturn in short-term vacancies, followed by Accounts & Financial.
Sebastian Burnside, Chief Economist at Royal Bank of Scotland, commented: “Following the post-pandemic hiring boom, the latest Report on Jobs survey indicates that recruitment activity lost further momentum in November amid a slowdown across the economy.
“Greater uncertainty around the outlook and candidate shortages have taken a toll on staff hiring across Scotland. Latest data indicated a notably steeper contraction in permanent placements, while temp billings fell for the second consecutive month.
“At the same time, labour scarcity resulted in strong growth in pay, with both starting salaries and hourly wages rising at sharper rates during November.
“The steeper drop in candidate availability across Scotland, which was often blamed on a generally low unemployment rate, fewer foreign workers, worries over the economic climate and cost of living crisis, is likely to add further upwards pressure on pay in the months ahead, particularly if firms want to attract and secure the skilled workers they need.”
Chancellor to announce reforms to drive growth and secure the UK’s position as world leading financial services hub in Edinburgh today.
Ringfencing rules are set to be updated to release banks without major investment activities from the regime, regulators will be given a new remit to deliver growth and a widespread review will repeal hundreds of pages of EU law.
The Government will continue to deliver reforms across the economy to drive economic growth during challenging times.
Chancellor, Jeremy Hunt, will announce a package of over 30 regulatory reforms to secure the UK’s place as the world’s foremost financial centreduring a visit to Edinburgh today,
The “Edinburgh Reforms” will build on the unparalleled strength of the UK’s financial services sector, taking advantage of the opportunities provided by the UK’s exit from the European Union to tailor regulations to suit the country’s needs.
Today the Treasury will publish its plan to rigorously review, repeal and replace hundreds of pages of EU regulation ranging from disclosure for financial products to prudential rules for banks, creating a tailor-made UK regulatory framework based on international best practice that balances burden on business with protection for the consumer.
Rules that hold back growth will be reviewed, with overbearing EU rules which put companies off listing in the UK being overhauled, among dozens of regulations within scope of the Financial Services and Markets Bill.
The Government will also announce changes to ringfencing rules which currently require major banks to separate their retail and investment arms, and retail banks have to comply even if they don’t have an investment arm, a time consuming regulatory exercise.
Reforms will cut red tape and boost banking competition in response to the Skeoch review by freeing retail focused banks from ringfencing rules while maintaining protections for consumers. The UK’s world leading regulatory regime has evolved over the past decade and will continue to protect consumers and safeguard financial stability.
Chancellor of the Exchequer, Jeremy Hunt said: “This country’s financial services sector is the powerhouse of the British economy, driving innovation, growth and prosperity across the country.
“Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector.
“Today we are delivering an agile, proportionate and home-grown regulatory regime which will unlock investment across our economy to deliver jobs and opportunity for the British people.”
This builds on the reforms to Solvency II announced in the Autumn Statement which will unlock over £100 billion for productive investment from UK insurers over the next decade, such as clean energy infrastructure.
The Chancellor is also expected to issue new mandates to the Financial Conduct Authority and the Prudential Regulation Authority setting out how they will help deliver growth and promote the international competitiveness of the UK.
The financial services sector is vital for Britain’s economic strength, contributing £216 billion a year to the UK economy. This includes £76 billion in tax, enough to fund the entire police force and state school system, while employing over 2.3 million people – with 1.4 million outside London and 163,000 people in Scotland.
While in Edinburgh today, the Chancellor will meet with top financial services CEOs to discuss these reforms and how the sector can further drive investment and growth in the UK.
As confirmed in the Autumn Statement, the government will look to announce changes to EU regulations in four other growth industries by the end of next year, including digital technology, life sciences, green industries and advanced manufacturing.
TUC: ‘we look set to remain trapped in the doom loop of austerity politics’
Tackling inflation is top of the priority list to stop it eating into paycheques and savings, and disrupting business growth plans.
To protect the most vulnerable the Chancellor unveiled £26 billion of support for the cost of living including continued energy support, as well as 10.1% rises in benefits and the State Pension and the largest ever cash increase in the National Living Wage
Necessary and fair tax changes will raise around £25 billion, including an increase in the Energy Profits Levy and a new tax on the extraordinary profits of electricity generators.
Decisions on spending set to save £30 billion whilst NHS and Social Care get access to £8 billion and schools get an additional £2.3billion reflecting people’s priorities.
To deliver prosperity, he’s also committed to infrastructure projects including Sizewell C and Northern Powerhouse Rail, along with protecting the £20billion R&D budget.
The Chancellor has today (Thursday 17th November) announced his Autumn Statement, aiming to restore stability to the economy, protect high-quality public services and build long-term prosperity for the United Kingdom.
Jeremy Hunt outlined a targeted package of support for the most vulnerable, alongside measures to get debt and government borrowing down. The plan he set out is designed to fight inflation in the face of unprecedented global pressures brought about by the pandemic and the war in Ukraine.
The Chancellor of the Exchequer Jeremy Hunt said: “There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. We do so today with British resilience and British compassion.
“Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.”
To protect the most vulnerable from the worst of cost-of-living pressures, the Chancellor announced a package of targeted support worth £26 billion, which includes continued support for rising energy bills. More than eight million households on means-tested benefits will receive a cost-of-living payment of £900 in instalments, with £300 to pensioners and £150 for people on disability benefits.
The Energy Price Guarantee, which is protecting households throughout this winter by capping typical energy bills at £2,500, will continue to provide support from April 2023 with the cap rising to £3,000. With prices forecast to remain elevated throughout next year, this equates to an average of £500 support for households in 2023-24.
Working age benefits will rise by 10.1%, boosting the finances of millions of the poorest people in the UK, and the Triple Lock will be protected, meaning pensioners will also get a rise in the State Pension and the Pension Credit in line with inflation.
The National Living Wage will be increased by 9.7% to £10.42 an hour, giving a full-time worker a pay rise of over £1,600 a year, benefitting 2 million of the lowest paid workers.
The Chancellor also announced a £13.6 billion package of support for business rates payers in England. To protect businesses from rising inflation the multiplier will be frozen in 2023-24 while relief for 230,000 businesses in retail, hospitality and leisure sectors was also increased from 50% to 75% next year.
To help businesses adjust to the revaluation of their properties, which takes effect from April 2023, the Chancellor announced a £1.6 billion Transitional Relief scheme to cap bill increases for those who will see higher bills.
This limits bill increases for the smallest properties to 5%. Businesses seeing lower bills as a result of the revaluation will benefit from that decrease in full straight away, as the Chancellor abolished downwards transitional reliefs caps. Small businesses who lose eligibility for either Small Business or Rural Rate Relief as a result of the new property revaluations will see their bill increases capped at £50 a month through a new separate scheme worth over £500 million.
To protect high-quality front-line public services, access to funding for the NHS and social care is being increased by up to £8 billion in 2024-25.
This will enable the NHS to take action to improve access to urgent and emergency care, get waiting times down, and will mean double the number of people can be released from hospital into care every day from 2024.
The schools budget will receive £2.3 billion of additional funding in each of 2023-24 and 2024-25, enabling continued investment in high-quality teaching and tutoring and restoring 2010 levels of per pupil funding in real terms.
All other departments will have their Spending Review settlements to 2024-25 honoured in full, with no cash cuts, but will be expected to work more efficiently to live within these and support the government’s mission of fiscal discipline.
To improve public finances, from 2025-26 onwards day to day spending will increase more slowly by 1% above inflation, with capital spending maintained at current levels in cash terms. This means departmental spending will still be £90 billion higher in real terms by 2027-28, compared with 2019-20 while £30 billion of public spending will be saved.
To raise further funds, the Chancellor has introduced tax rises of £25 billion by 2027-28. Based around the principle of fairness, all taxpayers will be asked to contribute but those with the broadest shoulders will be asked to contribute a greater share.
The threshold at which higher earners start to pay the 45p rate will be reduced from £150,000 to £125,140, while Income Tax, Inheritance Tax and National Insurance thresholds will be frozen for a further two years until April 2028. The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024 and the Annual Exempt Amount in capital gains tax will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.
The most profitable businesses with the broadest shoulders will also be asked to bear more of the burden. The threshold for employer National Insurance contributions will be fixed until April 2028, but the Employment Allowance will continue to protect 40% of businesses from paying any NICS at all.
In addition, the government is implementing the reforms developed by the OECD and agreed internationally to ensure multinational corporations pay their fair share of tax. And as confirmed last month, the main rate of Corporation Tax will increase to 25% from April 2023.
To ensure businesses making extraordinary profits as a result of high energy prices also pay their fair share, from 1 January 2023 the Energy Profits Levy on oil and gas companies will increase from 25% to 35%, with the levy remaining in place until the end of March 2028, and a new, temporary 45% levy will be introduced for electricity generators. Together these measures will raise over £55 billion from this year until 2027-28.
To ensure fiscal discipline while providing support for the most vulnerable, the Chancellor has introduced two new fiscal rules, that the UK’s national debt must fall as a share of GDP by the fifth year of a rolling five-year period, and that public sector borrowing in the same year must be below 3% of GDP. Overall, the Autumn Statement improves public finances by £55 billion by 2027-28, and the OBR forecasts both of these rules to be met a year early in 2026-27.
To ensure prosperity in the future, the Chancellor recommitted to the £20 billion R&D budget and made numerous infrastructure commitments. Sizewell C nuclear plant will go ahead, with the EDF contract to be signed at the end of the month, providing reliable, low-carbon power to the equivalent of 6 million homes for over 50 years.
The Chancellor also confirmed commitments to transformative growth plans for our railways including High Speed 2 to Manchester, the Northern Powerhouse Rail core network and East West Rail, along with gigabit broadband rollout.
Plans for the second round of the Levelling Up Fund were confirmed, with at least £1.7 billion to be allocated to priority local infrastructure projects around the UK before the end of the year.
In further efforts to level up the UK, a new Mayor will be elected in Suffolk as part of a devolution deal agreed with Suffolk County Council, and the government is in advanced discussions on mayoral devolution deals with local authorities in Cornwall, Norfolk and the North East of England.
Many of today’s tax and spending decisions apply in Scotland, Wales and Northern Ireland.
As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £1.5 billion over 2023-24 and 2024-25, the Welsh Government will receive £1.2 billion and the Northern Ireland Executive will receive £650 million.
As a result of today’s tax and spending decisions, the Scottish Government will receive around an additional £1.5 billion over 2023-24 and 2024-25.
The Chancellor has reconfirmed the UK Government’s commitment to work with the Scottish Government on options to improve the A75, in line with the findings from the Union Connectivity Review.
He also confirmed that funding for the UK’s 9 Catapult innovation centres will increase by 35% compared to the last funding cycle, this includes the offshore renewable catapult in Glasgow.
The Chancellor of the Exchequer Jeremy Hunt said:“This Autumn Statement will help deliver economic stability across the UK. We’ve made tough decisions to tackle inflation, but we’re committed to protecting the most vulnerable against the rising cost of living.
“Scottish familieswill receive billions of pounds of UK Government support, such as inflation-matching increases in benefits and the state pension, and the Scottish Government is receiving an additional £1.5 billion over the next two years to help protect vital public services and drive prosperity through the challenging times ahead.”
Scottish Secretary Alister Jack said: “We are facing complex global challenges, and the Chancellor has had to take some difficult decisions. By reducing our borrowing, tackling the root causes of inflation and putting our public finances on a stable footing, we will create the economic stability we need for our long-term prosperity.
“As we promised, we have put in place extra support for those who need it most, with support on energy bills and increases in pensions, benefits and the National Living Wage.
“The Scottish Government will receive an additional £1.5 billion, to help support public services in Scotland. We are also putting extra money into two key projects in Scotland. Catapult will help grow our offshore energy capability, and a feasibility study to upgrade the A75 will pave the way for much improved connectivity between Scotland, Northern Ireland and England.”
COMMENT and REACTION
Households ‘paying a steep price for UK economic mismanagement’ – Swinney
The UK Government’s Autumn Statement fails to address the pressure on devolved budgets to help people with the cost of living crisis, support public services, and finance fair pay offers, according to Deputy First Minister John Swinney.
Reacting to Chancellor of the Exchequer Jeremy Hunt’s fiscal announcement, Mr Swinney expressed dismay at his failure to address the impact of inflation on the Scottish Government’s budget, when businesses and households continue to face financial uncertainty and £1 billion in savings have had to be found to help those who need it most.
The Deputy First Minister said: “Today’s statement shows that households across Scotland are paying a steep price for the economic mismanagement of the UK Government, with average household disposable incomes forecast to fall by 7% in real terms according to the Office for Budget Responsibility.
“This would erode just under 10 years of growth in living standards, taking them back to levels not seen since 2013-14, meaning they would not recover to pre-pandemic levels until after 2027-28 – a devastating indictment of the UK Government’s management of the economy.
“Inflation is eating away at the Scottish budget, and due to the lack of additional funding in 2022-23 and the financial restrictions of devolution, we have had no choice but to make savings of more than £1 billion.
“I welcome the Chancellor’s decision to increase benefits in line with inflation from next financial year and retain the triple lock on pensions – both measures we have consistently called for. However, the higher energy price cap from April is still unsustainable for many households.
“The proposals may limit the impact for some consumers, but the UK Government needs to carefully consider the affect a £500 rise in energy bills will have on those who are in or at risk of fuel poverty. And there’s still no certainty on how businesses struggling to stay afloat will be supported from April after the Energy Bill Relief Scheme ends.
“The constant U-turns on tax by the UK Government have made planning for the Scottish Budget more challenging this year. We will take time to consider the implications for Scotland before setting out our own plans as part of the normal budget process.
“I am pleased the Chancellor has finally listened to our calls to tax more of the windfall gains in the energy sector, but he should have gone further to remove the poorly targeted investment allowance, which only serves to encourage short-term investment in fossil fuels rather than promoting long-term, sustainable energy solutions.
“This leaves me with the difficult task of setting Scotland’s Budget for 2023-24 with no hope of financial flexibility to make a real difference in the lives of those who need it most.”
HEALTH
Amanda Pritchard, NHS Chief Executive, said:“When the government – and the country – face such a daunting set of challenges, we welcome the chancellor’s decision to prioritise the NHS with funding to address rising cost pressures and help staff deliver the best possible care for patients. This shows the government has been serious about its commitment to prioritise the NHS.
“The NHS is already one of the most efficient health services in the world and we are committed to delivering further efficiencies, with over £5 billion already freed up for reinvestment in patient care this year.
“NHS staff are delivering a huge amount in the face of record demand with 10% more GP appointments than before Covid, an extra 35 million in a year, more support than ever for peoples’ mental health and the highest level of cancer checks while transforming peoples’ lives with innovative treatments such as laser therapy for epilepsy and genetic testing for sick babies and children.
“While I am under no illusions that NHS staff face very testing times ahead, particularly over winter, this settlement should provide sufficient funding for the NHS to fulfil its key priorities. As ever, we will act with determination to ensure every penny of investment delivers for patients.”
SCHOOLS
Leora Cruddas CBE, Chief Executive, Confederation of School Trusts said:“We are delighted that the Government has prioritised schools in the Autumn statement.
“We know economic times are tough. But investment in the education of our children is an investment in our future.
“Schools and school trusts have the talent and expertise to find innovative and cost-effective ways to keep improving education and supporting their local communities, and the announcement today will help them to plan ahead.”
INFLATION
Helen Dickinson, Chief Executive, the British Retail Consortium, said: “High inflation remains a major threat to the UK economy and we support the government’s objective of bringing this down.
“Inflation is making people poorer, damaging consumer confidence and holding back demand. It pushes up the costs to businesses which further increases prices for consumers. As the retail industry enters the crucial Christmas period, it is vital that inflation is brought to heel.”
NATIONAL LIVING WAGE
Bryan Sanderson, Chair, Low Pay Commission, said:“The rates announced today include the largest increase to the NLW since its introduction in 2016 and will provide a much-needed pay increase to millions of low-paid workers across the UK, all of whom will be feeling the effects of a sharply rising cost of living.
“For a full-time worker, today’s increase means nearly £150 more per month. The tightness of the labour market and historically high vacancy rates give us confidence that the economy will be able to absorb these increases.
“Businesses also have to navigate these economically uncertain times and by ensuring we remain on the path to achieve our 2024 target, employers will have greater certainty over the forward path. These recommendations have the full support of the business, trade union and academic representatives who make up the Commission.”
BUSINESS RATES – ONLINE SALES TAX
Baldock, CEO, Currys plc, said:“We’re happy that the Treasury listened to our concerns on business rates, and acted quickly.
“I’m also delighted at the ditching of the Online Sales Tax, which would have added costs for consumers and depressed business investment. We will continue to support customers and colleagues through this cost-of-living crisis, keeping prices low, jobs well-paid, and helping everyone enjoy amazing technology.”
James Lowman, Chief Executive, Association of Convenience Stores (ACS) said:“We welcome the freeze of the business rates multiplier for another year. The extension and increase in the retail, hospitality and leisure relief scheme will be warmly welcomed by small business in particular.
“Scrapping downward transition will help the businesses most adversely impacted by the pandemic and other market factors, and the Supporting Small Business Scheme will help those who have grown their business to the point where they lose some business rates relief they previously claimed.
“This package of business rates measures meets our asks to the Chancellor and we are delighted that he has listened. We will continue to work with the Treasury and other departments on modernising the whole business rates system.”
A spokesperson for ASOS said:“We welcome the Chancellor’s decision to rule out an Online Sales Tax after considering the evidence and arguments.
“Like other online retailers and major High Street names, we opposed this new sales tax which would have added significant business costs against the backdrop of the current challenging economic environment and risked higher prices, so this decision is good news for consumers and businesses alike.”
Reserch & Development
A spokesperson for GSK said:“We welcome the Government’s continued commitment to increase investment in R&D and boost incentives for businesses to invest in innovation.
“Given the challenging economic circumstances we face, it’s even more important that the Government continues to take steps to secure the UK’s leadership in science and technology, including life sciences which are a key source of jobs and growth, and we look forward to working with the Government to deliver this ambition.”
Richard Torbett, Chief Executive, The Association of the British Pharmaceutical Industry (ABPI), said: “The Chancellor has delivered a pragmatic Autumn Statement, taking some tough decisions while recognising the vital role innovation must play in setting the economy back on the path to recovery.
“The decision to protect spending on research and development, as well as increasing the R&D expenditure credit from 13 to 20 percent are both essential to boosting the UK’s share of global pharmaceutical R&D spending and investment.
“The life sciences industry is uniquely well-placed to deliver the innovation-led growth the UK needs. To realise this opportunity, the government must continue striving to make the UK a more competitive and attractive place to invest. This journey is already well underway, but we need to raise our ambitions even further if we are to truly make the UK a life science superpower.”
SOLVENCY II
Hannah Gurga, Director General, The Association of British Insurers (ABI), said:“We strongly welcome these changes to the Solvency II regime which will allow the UK insurance and long-term savings sector to play an even greater role in supporting the levelling up agenda and the transition to Net Zero.
“Meaningful reform of the rules creates the potential for the industry to invest over £100bn in the next ten years in productive finance, such as UK social infrastructure and green energy supply, whilst ensuring very high levels of protection for policyholders remain in place.
“More broadly, it will encourage a thriving and competitive industry which will ultimately benefit the UK economy, the environment and customers. This meets the objectives that HM Treasury set out to achieve and which the industry has supported throughout.”
TUC: Working people take the hit for Tory economic failure
In his Autumn Statement today, Jeremy Hunt, the fourth Conservative Chancellor this year, announced that the UK economy is in recession. The documents that accompanied his statement warned of half a million job losses. Staggeringly workers face in 2022 and 2023 the worse years of a pay crisis that is now reckoned to be lasting basically for two decades.
Rightly protections were announced against further energy price rises, and social security protection was uprated in line with inflation. The government took the advice of the low pay commission to increase the minimum wage to £10.42 an hour.
But this support is paid for by steep cuts to departmental budgets from 2024-25 onwards. And immediately there was no extra money to support public servants in the face of double-digit inflation.
As Frances O’Grady said: ““This is a recession made in 10 Downing Street, which will put jobs at risk and hit workers’ wages. We are all paying the price for the last decade of Tory governments, which decimated growth and living standards.
“Today’s statement shows it will be two decades until real wages recover. Millions of key workers across the public sector – who got us through the pandemic – face years of pay misery as departmental budgets are brutally squeezed.”
Real pay and jobs
The OBR forecast expects that the real pay squeeze that’s already in its fourteenth year is set to last another five. Real average weekly earnings aren’t expected to go back above 2008 levels until 2027 – a 19-year pay squeeze that’s hit workers hard and is longer than any other since the Napoleonic times. The statement itself did little to help. The minimum wage has increased, but by less than inflation and still below the level of a real living wage. There was nothing to suggest public sector workers will get pay rises to help face the rising cost of living, after a decade in which their pay has been squeezed time and time again.
In terms of the labour market, the OBR has forecast a sustained fall in employment, still flatlining economic participation, and a rise in unemployment, which is not expected to return to the pre-crisis level until beyond the end of the forecast period in 2027. In terms of headcount the rise in unemployment is half a million – though the Bank of England is forecasting that it will rise by double this.
Policies to support working people and households
Ahead of the disastrous mini budget we called for protection against rising bills, with any costs shared fairly. And we called for a plan to grow the economy. The most prominent feature of the Chancellor’s plan was also the most worrying – to celebrate Nigel Lawson’s big bang that scrapped regulation on the city and set the trajectory to the global financial crisis.
Protection against inflation
A universal protection against rising energy bills was replaced with a more targeted approach, with bills now allowed to rise to an average of £3,000 p.a. (up from £2,500), but extra support for those on means tested benefits, pensioners, and disabled people. But energy are not the only bills that are soaring – CPI inflation is now at a forty year high of 11.1 per cent. Food inflation is at a record level, fuel prices are very high and prices are up across the board. The ONS reported this week that inflation rates hitting the lowest earners are three percentage points higher than those for the highest earners.
Benefits
Chancellor said, ‘I am proud to live in a country with one of the most comprehensive safety nets anywhere in the world.’ This comment is beyond belief, as since 2010 this Government have implemented cuts which have decimated the social security system.
The benefit uprating by the Chancellor today has been the bare minimum. The standard out of work benefit is now worth just 13% of average weekly earnings. And the basic amount of universal credit will be worth £43 a month less than in 2010 even after this uprating is in place.
The state pension has fared better than working age benefits thanks to the triple lock, but ours remains one of the least generous in Europe. So the decision to return to the triple lock formula and increase pensions by CPI inflation after this year’s real terms cut, and to increase pension credit in line with prices too, was the bare minimum.
The autumn statement also contained a strong hint that the government was preparing to axe its formula linking state pension age rises to improvements in life expectancy and bring forward its planned increase. The savings to government – and cost to the public people – of this move would dwarf the impact of pension increases resulting from the triple lock in any given year.
The minimum wage will be raised to £10.42 in 2022/23. Significant increases are needed especially after real terms declines over the last couple of years. But the announced increase will still leave the real value of the minimum wage 1.1 per cent below where it was two years before. The government must, instead, put the minimum wage on a growth path to £15 as soon as possible.
Infrastructure investment
The Chancellor warned that capital investment was too soft a soft target for austerity (like under George Osborne), then proceeded to cut planned spending by £5bn in 25-26, £9bn in 26-27 and £15bn in 27-28.
This will have major impacts on delivering the infrastructure needed to keep people moving, the UK economy competitive, and to hit climate targets.
Taxing wealth and windfalls
The Chancellor was duty bound to hit the better off. But these were not big changes in the great scheme of things. The biggest hits came on the energy profits levy and the electricity generator levy, raising £14bn in 23-24 and £11bn in 24-25. The wider hit from the 20% income tax thresholds will earn the Treasury a cool £6bn a year, compared to less than £1bn raised from lowering the threshold for paying the top rate of tax. All these changes are however dwarfed by the reversal of Rishi Sunak’s health and social care levy which costs £16-£17bn a year.
More pay misery for millions of public sector workers and the services they deliver
A strong economy relies on strong public services. Welcome words from the Chancellor as he set out his fiscal statement. Yet, warm words failed to match spending plans.
The Chancellor confirmed government would stick to cash spending plans set out in the Comprehensive Spending Review 2021. Meaning departmental budgets would not be adjusted to account for soaring inflation, placing unsustainable pressure on public services and creating more years of pay misery for the millions of key workers across the public sector who got us through the pandemic.
Analysis carried out by NEF for the TUC ahead of the budget showed, departmental budgets needed an additional £43 billion just to remain at the level set out in the Comprehensive Spending Review 2021 and keep public sector pay in line with the cost-of-living. This did not materialise.
Some relief was provided for key government departments such as the NHS, social care and schools. Nothing for public sector pay rises or cash starved areas like the court system, prisons, HMRC and local government.
Schools will receive an additional £2.3 billion in funding for 2023-24 and 2024-25, representing an overall spending increase of 4 per cent, returning per pupil spending to 2010 levels.
But no additional funding was provided for adult education, where spending fell by 49 per cent between 2009 and 2019 – surprising given the Chancellor’s emphasis on the importance of skills to economic stability and growth.
Nor for the cash-strapped early years sector, where the number of providers fell by 4,000 between 1 April 2021 and 31 March 2022, in large part due to a toxic combination of unsustainable funding levels and soaring costs for essential expenditure such as energy and food.
Health and social care will receive additional funding of around £7.5 billion. An estimated £1.6 billion of the money identified for social care requires local authorities generating additional revenue through rises to council tax.
At a time when millions of households are struggling with the cost-of-living, it is hard to see how councils will do this without putting even more financial strain on families.
Councils in areas of high socio-economic deprivation, often the most cash strapped when it comes to social care, will have the hardest time raising additional revenue.
The additional £3.3 billion for the NHS represents less than 1% of it’s overall budget. A drop in the ocean. Only a fraction of what our NHS and its workforce needs this winter. With NHS vacancies at a record-high, one in ten posts unfilled, what the health system desperately needed was investment in its workforce.
Indeed, across the public sector, what was needed and missing from today’s fiscal statement was a recognition that after twelve years of government imposed pay restraint and real terms pay cuts, our public sector workforce are on their knees. To deliver world class, high-quality public services, we need to treat the people that deliver them, with respect and dignity. That starts with spending plans that deliver cost-of-living proof pay rises in 2022 and beyond.
Public spending, GDP and the government finances
In spite of all this pain, the biggest risk is still the economy. Here the OBR have let the government off lightly. While the recession means a decline in GDP next year of 1.4 per cent, activity recovers quickly into 2024 and then continues at rates that would be exceptional given the experience since 2008. When asked at their press conference why the forecasts were so much stronger than those of the Bank of England, the OBR offered – ‘ask the Bank’.
This vigour comes in spite of much higher than anticipated central bank interest rates, virtually unchanged government support on the immediate horizon, and heavy austerity into the future (at the press conference the OBR equivocated whether it was comparable to Osborne’s).
In a way we are lucky. Better projected GDP outcomes protect against the need for even tougher austerity, given the vogue for fiscal rules. Nonetheless the government have also accepted a fairly substantial increase in borrowing over coming years, with public sector debt is expected to peak at 97.6 per cent of GDP in 2025-26.
There are no game changers here, and there is very little protection against a steeper deterioration. In the meantime workers face yet another severe reduction in the standard of life. But sadly nothing here is new. Until we have a government that has a serious plan to put work before wealth, we look set to remain trapped in the doom loop of austerity politics.
We know that today’s choices weren’t inevitable. There is a better plan to grow the economy, protect our public services, and get wages rising. Now we need a government prepared to deliver it.
Law firm CMS and the Fraser of Allander Institute has launched a new campaign aimed at bringing together Scotland’s business community, government and policy groups to maximise the nation’s economic growth potential.
The International Scotland initiative begins with the release of a new report highlighting some of the core opportunities for Scottish business, trade, and tourism to excel on the international stage.
The International Scotland report sets out how the nation punches above its weight in key sectors such as renewables, tourism and food & drink. It also recognises the strength of the Scottish university sector in supporting new, innovative companies and highlights how Scotland is an ideal location to attract international talent.
The report also focuses on some of the pros and cons of Brexit, suggesting that the UK’s exit from the EU could bring opportunities for the whisky market in nations like India and has also resulted in an upturn in international students at Scottish universities. It does, however, highlight the damaging impact Brexit has had on supply chains and many companies’ ability to do business, as well as its detrimental effect on foreign investment into Scotland.
A full copy of the International Scotland report can be found here
CMS and the Fraser of Allander Institute will now stage a series of events across Scotland involving direct engagement with the business community, Scottish Government ministers and other policy influencers.
Richard Lochhead MSP, Scottish Government Minister for Just Transition, Employment and Fair Work, will address the first event, focusing on Scotland’s transition to net-zero, in Aberdeen on 22 November.
Ivan McKee MSP, Scottish Government Minister for Business, Trade, Tourism and Enterprise, will then speak at an event focused on his ministerial remit in Edinburgh on 23 November. Mr McKee will also address the final ‘Invest in Scotland’ event, taking place in Glasgow on 7 December.
During the events, participants will discuss the key themes covered by the International Scotland report with a focus on developing policy proposals and recommendations aimed at reducing economic barriers and maximising global economic opportunities.
Companies and individuals wishing to apply to attend the events can register their interest here
Allan Wernham, Managing Director of CMS Scotland, said: “CMS is proud to join forces with Fraser of Allander Institute to launch the International Scotland campaign.
“Leveraging the knowledge and expertise within both organisations, we are focused on the core themes of business, trade and tourism; inward investment; and the transition to net zero and the key opportunities and challenges for Scotland in fulfilling its full economic potential.
“We now look forward to engaging in further discussions with the business community, government and policy groups to build consensus on the best way forward and develop innovative policy ideas that will help the Scottish economy to thrive.”
Professor Mairi Spowage, Director of the Fraser of Allander Institute, said: “We are excited to work with CMS on this new, internationally focused campaign.
“Using the evidence base highlighted in the International Scotland report, we will engage with a wider cross-section of stakeholders to explore the key barriers and enablers for the Scottish economy on the international stage.
“The forthcoming events taking place across Scotland will serve as the basis for feedback, input, further reflection and, ultimately, policy recommendation to drive economic growth.”
Business Activity Index falls to 45.8 in October from 48.0 in September
Contraction in new orders quickens
Growth in employment further weakens
The contraction across Scotland’s private sector firms deepened during October, according to the latest Royal Bank of Scotland PMI® data. Adjusted for seasonality, the Business Activity Index posted below the neutral 50.0 threshold for the third month running, at 45.8, indicating a sharp decrease overall.
Inflows of new business also went into further decline, the latest downturn being the most severe in 20 months. To further add weakness across the sector, inflationary pressures reaccelerated from September’s recent low, as service providers reported quicker upturns in input costs and charges during October.
The gloomy performance resulted to the softest intake of workers in 18 months, with goods producers reporting their first reduction in employment since January 2021.
New business received at Scottish private sector firms fell sharply during October. The rate of decrease quickened from September to the fastest in the current fourth-month sequence of reduction.
Of the two sub-sectors, manufacturing firms reported the steeper downturn. Companies noted that looming recession, economic uncertainty and the cost of living crisis weighed on client activity.
The downturn in incoming new business across Scotland outpaced the UK-wide average.
Output expectations for the year ahead across private sector firms in Scotland strengthened in the three months to October. The increase in confidence was underpinned on planned expansions and investment, with firms also hopeful of future economic stability. That said, sentiment was relatively muted in context of historical data.
Business confidence across Scotland was broadly in line with that recorded for the UK as a whole.
Employment across the Scottish private sector expanded for the nineteenth month running in October. However, amid a cooldown in hiring activity at service providers, with goods producers reporting their first contraction since January 2021, the overall rate of growth ticked down to the joint-lowest in the aforementioned series.
The rate of job creation across Scotland remained softer than that seen at the UK level, which similarly also slowed in October.
October’s survey showed a sustained fall in levels of outstanding business across Scotland’s private sector. The respective seasonally adjusted index posted below the neutral 50 threshold for the fifth consecutive month, the latest reading signalling the fastest depletion in work outstanding since January 2021. As per surveyed businesses, declines in new orders allowed firms to work through previous backlogs.
The rate of contraction in Scotland was the third-fastest across the UK, ahead of Northern Ireland and Wales.
October data signalled a robust rise in input costs across Scotland’s private sector, thereby extending the run of inflation to 29 months. Adjusted for seasonality, the latest reading increased from September’s 13-month low as a result of a reacceleration in input price inflation reported at service firms. The uptick in average costs was attributed to higher wages and utilities, cost of living crisis and general inflation adding strain on costs.
Despite being severe, the pace of input price inflation was however, softer than the UK average.
In line with the upturn in average cost burdens, charge levied by Scottish private sector firms also inclined from September’s recent low at a quickened rate during October.
The rate of charge inflation across Scotland posted weaker than the UK-wide average which slowed during October.
Source: Royal Bank of Scotland, S&P Global.
Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, commented: “The Scottish private sector reported a third month of contraction during October. The downturn in activity quickened on the month, as stubbornly high inflationary pressures, the ongoing cost of living crisis and a threat of recession deterred growth. New orders received at firms also fell further.
“Employment trends across the sector indicated a slowdown in hiring activity over the recent months. The latest upturn was the joint-softest in the current 19-month sequence of expansion. At the same time, the level of outstanding business also fell at a much sharper rate. The data thus suggesting the further weakness in the labour market will not be surprising.
“As we proceed into the final quarter of the year, market conditions are set to become more challenging. The aggressive interest rate hikes, the decline in the value of sterling against the dollar and the rebound in post-COVID demand phasing out, all amidst the ongoing cost of living and energy crises, all point to an extremely difficult period for Scotland.”
A Holyrood committee has warned of difficult tax and spending decisions in the budget if the Scottish Government is to balance the books and address both the cost of living crisis and the lasting impact of Covid.
In a report published today, the Finance and Public Administration Committee’s says an ‘open and honest debate’ with the public needs to be fostered on how to balance spending priorities and taxation.
In its report, the Committee notes that public sector pay rises will be funded, at least in part, through a headcount reduction in the public sector, but calls on the Scottish Government to ensure this is done in a co-ordinated way that minimises the impact on public services.
The report adds it is also now time for the UK Government to concentrate on putting in place measures to bring more stability to the UK economy and recognise the impact of inflation on the Scottish block grant.
Finance and Public Administration Committee Convener Kenneth Gibson said: “Our Committee accepts that the Scottish Government faces difficult choices in balancing its approaches to spending and taxation – especially if it’s to maintain financial sustainability and support households and businesses through the cost of living crisis.
“An open and honest debate with the public about how services and priorities are funded is now needed, including on the role of taxation in funding wider policy benefits for society.”
On the challenges facing the public sector, Mr Gibson said: “We acknowledge the challenge the Scottish Government faces in identifying additional money to fund public sector pay rises which respond to inflation.
“The UK Government should also recognise the impact of inflation on the Scottish block grant.
“We ask for assurances from the Scottish Government that it will approach reducing the public sector headcount in a systematic, transparent, and co-ordinated way. This should be done in tandem with the public service reform agenda, with a view to minimising any impact on the delivery of public services.
“As we say in our report, it is now time for the UK Government to concentrate on putting in place measures to bring more stability to the UK economy.”
There’s been another busy week of economic and fiscal news to cover. The main headline is of course that the Bank of England Monetary Policy Committee (MPC) decided to raise interest rates for the eighth successive time, to 3%.
Also grabbing the headlines was the forecast that, if interest rates follow market expectations and go up to 5.25% by Q3 2023, the economy is likely to contract for 2 years, only returning to growth in Q3 2024.
The Governor of the Bank, Andrew Bailey, made clear that it was possible that the markets has over done the likely pathway for rates, implying that they may not end up getting above 5%.
But, as the chart below shows, their view is that the economy is in for a rough time over the next 2-3 years, whatever the specific pathway for rates. Whatever happens, their expectation is that we will not be above pre-pandemic levels of output by the end of 2025.
Chart: Outlook for UK GDP Growth, 2019 Q4=100
Source: BoE
On Wednesday, we published our latest Scottish Business Monitor, covering Q3 2022, which showed that business sentiment is now in negative territory for the first since the end of 2020.
Chart: Net balance (%) of firms expecting an increase in their volume of business over the next six months, Q1 1998 – Q3 2022
*Net balance of firms is defined as the share of firms reporting higher minus the share of firms reporting lower
With the price of goods, energy, and borrowing on the rise, the majority of Scottish firms that we surveyed are expecting to wind down their operations or pass on costs to their consumers over the next year.
However, there is some good news from our latest survey. Supply chain issues continue to ease, which may dampen inflationary pressures, and the ongoing energy crisis has motivated Scottish businesses to consider making energy-efficient improvements to their processes.
Additionally, In the most recent quarter, half of responding businesses reported that they had vacancies to hire new members of staff, down from 56% reported in the previous quarter.
Of those firms with vacancies, 90% were finding them difficult to fill – up 3 percentage points since the last survey. A lack of skills and applications continue to be the main barriers to filling job posts, and, increasingly, wage expectations are making it difficult for Scottish firms to hire the staff that they need.
Unsurprisingly, Scottish firms expect energy bills and wages to be their main cost pressures in the coming 6 months.
Scottish Economy contracts in August
Somewhat lost in the other news on Wednesday (see below) was new GDP data from the Scottish Government for August.
This showed that GDP fell by 0.3% in August, taking the Scottish economy below pre-pandemic levels of output – very consistent with the messages we saw from the Bank about a likely contraction overall in Q3.
The contraction was driven mainly by a fall in services output. In a sign of things to come, consumer facing services fell by 2.4%, chiming with what we are hearing from businesses.
Scottish Government cuts health funding to fund pay deals
On Wednesday, we had the Scottish Government’s Emergency Budget Review. We gave our initial reactions here, and the coverage since the publication on Wednesday has focussed very much on the cuts made to health spending to fund pay deals for health workers.
What is clear is that this may not be the end of the story for the 2022-23 budget. John Swinney in the Chamber made it clear that there could be further implications for the Scottish Budget from the UKG’s Autumn Budget on 17th November, perhaps even for 2022-23. And it is also clear that many pay deals are far from settled.
Glenigan’s autumn 2022-2024 Construction Forecast indicates poor market conditions are stifling construction activity, predicting a return to growth by 2024
Glenigan, one of the construction industry’s leading insight and intelligence experts, has released its widely anticipated autumn UK Construction Industry Forecast 2023-2024.
The key takeaway from this Forecast, which focuses on the next two years (2023-2024), is that the construction industry will struggle in the face of extremely challenging economic conditions, with predicted growth in decline during 2022 (-2%) and 2023 (-2%).
However, the sunnier uplands, although far off in the distance, are starting to emerge on the horizon, with a 6% increase predicted in 2024.
The slower road to recovery
Post-pandemic project-starts recovery has lost considerable momentum during the second half of 2022. Forecast to slip back by 2% by the end of the year, and in 2023, it paints a dim picture of activity levels in the short term.
Glenigan predicts the next 24 months to be a challenging period for the construction industry, with ongoing material, labour, and energy supply chain disruption continuing to hold back activity for the foreseeable future.
These external events have resulted in rocketing inflation, rising interest rates, and stalled economic growth, affecting the pipeline of future work. This has been further compounded by the promise of higher tax, utility bills, and rising mortgage costs which has constrained consumer-related construction, including private housing, retail, and hotel and leisure.
The situation has prompted some clients, contractors and developers to pause or scale back on planned investments, further stagnating output. This was confirmed by the value of projects securing detailed planning consent during the first nine months of 2022 dropping by 5%, and main contract awards falling by 8% against the same period in 2021.
Resurgence in private residential construction
Housing market activity cooled-off in 2022, and is predicted to slow further in 2023 as developers respond to weakening market conditions.
Project-starts are forecast to drop 4% this year, with a further 5% decline next, as lower household incomes, higher mortgage rates and lack of affordable homes continues to afflict the wider housing market.
The reduction in stamp duty rates announced in the mini-Budget will provide a small benefit to first time buyers. However, the end of the government’s Help to Buy scheme has removed direct support for new builds, coupled with mortgage providers significantly raising rates in reaction to the current rate of inflation, meaning that any benefit for first time buyers will be negated for the foreseeable future.
Nevertheless, the growing prospect of a stabilising economy in 2023, prompted by a changing of the guard at Number 10, and gradually improving consumer confidence over the next two years supports a forecast of a respectable 15% rise in residential project-starts during 2024.
Social housing slips back
In the public sector, the social housing project-starts prediction is less positive, forecast to slip back during 2022 and 2023, following a rapid 16% recovery in 2021 as housing associations pressed on with schemes delayed during the pandemic.
Despite improved funding, increased construction costs appear to be significantly constraining development activity, with approvals similarly falling back over the past 12 months.
Industrial Consolidation
Industrial project-starts have enjoyed a strong rebound post-pandemic, a rise which has largely been driven by logistics and light industrial projects as significant growth areas. Looking forward, the sector faces a period of consolidation during 2023 and 2024 as the recent spurt in activity inevitably slows.
Weak domestic and overseas demand is expected to temper manufacturing investment in facilities, but warehousing and logistics premises are forecast to remain a growth area. This is due largely to a long-term shift towards online retailing, resulting in continued demand for logistics space, and accounting for the majority of industrial project-starts’ 25% growth in 2022.
Retail tails-off
In the short term, however, the demand for both logistics and retail space is expected to be damped by weak retail sales as consumer confidence falls in response to higher inflation and falling earnings.
An overhang of empty retail premises, weak consumer spending, and the growth in online sales’ market share is predicted to constrain retail construction starts over the forecast period.
Despite this, investment by discount supermarkets Aldi and Lidl are set to be a bright spot within the sector over the forecast period.
Back to the office
Office starts have also bounced back sharply since 2021, increasing by 27%. The Covid-19 pandemic radically altered working trends globally as many businesses shifted to hybrid working, reducing overall floorspace requirements.
Despite this, the sector is predicted to benefit over the forecast period from a rise in refurbishment projects as tenants and landlords adapt premises to further accommodate these changing work patterns. Conversely, new build office projects are likely to be slower to recover as developers continue to assess the long-term demand for additional office accommodation.
Work, rest and delay
The squeeze on household budgets is set to curb consumers’ discretionary spending in the hospitality and leisure industries. The hospitality sector is still recovering from operational restrictions during Lockdown, as well as reduced revenues due to fewer overseas visitors.
Combined with spiking energy costs over the last 12 months, as well as a potential fall-off in domestic custom over 2023, the hospitality sector will be under considerable pressure. This is predicted to result in retrenchment, causing further delays to project-starts as asset owners wait for confidence to return.
Investment bolsters public sector
A core pillar of the Government’s UK Growth Strategy, public sector investment was set to be an important driver of construction activity over the forecast period. Funding for rail projects and regulated utilities in particular have been tipped to provide the bulk of the output over the forecast period.
However, as a new administration begins, with an ambition to balance the public finance books, planned capital funding allocation may be vulnerable, with a potential range of departmental cuts on the horizon to protect the economy against a looming recession.
Securing our energy infrastructure
Energy security will no doubt remain a national priority following the sharp rises in energy prices over the course of 2022, and an over-dependence on gas-powered electricity. This is expected to drive investment in offshore wind farms, solar PV, increasing our nuclear capacity and strengthening nascent hydrogen capture capabilities.
Building for future generations
The Government is also committed to rebuilding 500 schools over the coming decade. The latest Spending Review includes additional capital funding for the Department of Education, in a move to tackle the shortage of secondary school places. This is expected to support growth in school building projects in 2023 after a weak performance over the last year.
Healthier predictions
Positively, health sector project-starts remained high during both 2021 and 2022, with an optimistic outlook for the future as a 3.8% real-term growth rate in NHS capital funding is set to maintain project-starts at a high level over the forecast period.
Whilst starts are forecast to slip back 6% in 2023, the value of work started during 2021 and 2022 remains above pre-pandemic levels.
Commenting on the Forecast, Glenigan’s economic director Allan Wilen says, “Construction will face a challenging environment in the coming year as the Russia-Ukraine war continues to hinder the UK’s post-Covid recovery, exacerbating supply chain disruption, resulting in materials and energy shortages, and leading to cost inflation and dented market confidence.
“The pattern of UK construction activity is being reshaped by economic slowdown, but structural changes are expected to create new opportunities in warehouse & logistics, office refurbishment and new housing schemes. Going forward, it will be crucial for firms to be responsive and adaptable in order to mitigate risks in the current marketplace and exploit new opportunities as they emerge over the forecast period.”
To request a copy of Glenigan’s November 2022 Forecast click here.
To find out more about Glenigan, its expert insight and leading market analysis, click here.
Brexit has cost Edinburgh the equivalent of £211.4 million as Scottish exports have plummeted since the UK left the EU to the value of £2.2bn.
Figures from HMRC show that exports have dropped 13% in the past two years from £16.7bn to £14.5bn.
The £2.2bn loss is equivalent to Edinburgh losing £211.4 million.
Commenting, Gordon Macdonald MSP said: “Brexit has been an unmitigated disaster for every area of Scotland, including in Edinburgh. These latest figures show why it is essential for Scotland to become independent and re-join the European Union.
“Only with independence can we get back on the road towards prosperity as both Labour and the Tories offer no way back to the European Union, just continuing decline under Westminster control.
“Industries in Edinburgh and across Scotland are suffering as a result of the disastrous Brexit, the only way Scotland can flourish and realise our full potential is by becoming an independent country in the European Union.”
