Economic Commentary - September 2021

The Economic Commentary provides a monthly update on global, UK and Scottish economic trends, drawing on recent economic data as well as feedback from businesses.

The methodology consisted of desk research.

The second quarter of 2021 saw varying degrees of economic recovery from the pandemic across economies, largely depending on the level of restrictions present in each country. The UK and the Eurozone outperformed other major economies although there are some signs that business activity is starting to slow. Scotland’s economy grew at a rate of 4.7% over the second quarter as restrictions have eased. Private sector activity in August outpaced all other UK nations and regions. The Scottish labour market has also strengthened, with higher employment and fewer furloughed workers over the summer. However, staff shortages are being recorded across a number of sectors. Businesses are responding by offering increased salaries and other incentives. Shortages of some goods, particularly in the food, construction and engineering sectors are also being reported by Scottish businesses, a knock-on effect of both Brexit and COVID-19. As a result, businesses are looking to both local and worldwide suppliers as alternatives. Growth forecasts for the global economy have improved since the start of the year but again vary across countries, largely down to different stages of vaccine rollout.

The latest forecast for the Scottish economy is for robust growth in 2021 as restrictions ease, and a return to pre-pandemic levels of output in the second quarter of 2022. Possible headwinds facing Scottish businesses in the near term include ongoing rising input costs and competition for staff.