Economic Commentary - June 2021

This report gives a monthly update on Global, UK and Scottish economic trends and performance, drawing on a wide range of economic indicators and commentaries.

The methodology consisted of desk research.

Economic recovery from the pandemic is being dictated by the level of restrictions present in each country, with the U.S. and China outperforming other major economies in the first quarter of 2021. The UK economy declined in the first quarter, but a strong rebound in business activity is now underway. Scotland’s economy is also beginning to grow as restrictions ease, but ongoing use of the furlough scheme makes the extent of recovery in the labour market difficult to measure. Scottish businesses are expressing cautious optimism as the country exits lockdown. However, many report ongoing uncertainty as a result of the return to the tier system of restrictions, as well as an inability to plan tied to uncertainty around the pace and level at which demand will return. The UK’s departure from the EU also continues to be a major issue for Scottish businesses trading with Europe – challenges around paperwork and additional costs have generally not eased. Prospects for the global economy have improved considerably but the outlook varies across regions depending on vaccine progress. The latest forecast for the UK economy is for robust growth in 2021 as restrictions ease, and a smaller increase in unemployment than previously anticipated.

Possible headwinds facing Scottish businesses in the near term include rising costs and competition for staff – while a strong rebound in global trade and a new incentive for business investment offer opportunities to accelerate recovery.