Scottish ITEM Club forecast supports claims of a 'lost decade'

Scotland faces a lost decade of high unemployment, sluggish economic growth and falling house prices, a major new report has warned.

The report warns employment levels are not set to return to their 2008 peak until the mid-2020s.

By Stefan Morkis
Published in the Courier : 05.12.11
Published online : 05.12.11 @ 09.39am

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Ernst and Young's Scottish ITEM Club winter forecast paints a bleak picture of Scotland over the next decade — even if the eurozone crisis is solved.

It predicts the number of people in employment will fall next year and although it will climb slowly after that by 2015 only 71% of the Scottish working age population will be in a job — three percentage points lower than in 2007.

The number of people seeking work is likely to rise by 85,000 because of changes to benefits and the rising retirement age, while the total number of people in jobs is expected to fall by 45,000, making competition for jobs even fiercer.

Employment levels are not set to return to their 2008 peak until the mid-2020s.

Additionally, projections for growth in the Scottish economy next year have been downgraded from 1.9% to 1.1% while house prices are set to fall until 2015 when they will begin to recover. However, Ernst and Young estimate that the average house price in 2014 will be below what it was in 2007, just before the economic downturn began in earnest.

Dougie Adams, senior economic advisor to the Ernst & Young Scottish ITEM Club, said: ''The economic losses are eye-watering. The cumulative loss in Gross Value Added (GVA — the value of goods or services produced in a region or country) to Scotland since the beginning of the financial crisis amounts to around £40 billion. That equates to a £17,000 loss per every household in the country.

"The deterioration in the international environment coupled with continued pressures on household budgets has further dented our expectations for growth in 2012. Any rapid recovery that makes good on losses in relatively short order looks to be a pipe dream.''

Mr Adams added: ''Scotland's output at the mid-point of this year was around the same size as it was in early 2006. The economy could be expected to grow by 10% over five years in normal economic times, which suggests any talk of a 'lost decade' of growth is no longer as fanciful as it once sounded.''

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