GROWTH in Scotland will slow to a near standstill next year as political uncertainties compound the challenges posed by the downturn in the North Sea according to leading economists who have slashed their forecast for the current year.

The influential EY Scottish Item club reckons gross domestic product will increase by just 0.4 per cent next year in Scotland, compared with 0.7 per cent in the current year.

The club had been predicting growth of 1.2 per cent this year before revising its predictions after the Brexit vote and Donald Trump’s victory in the US presidential election clouded the outlook for key markets.

The senior advisor to the EY Scottish Item Club, Dougie Adams, noted signs growth in the economy was already running out of steam before the results of the votes sent shockwaves through the boardrooms of Scotland.

“During the last 12 months Scottish growth has been challenged by various economic factors,” said Mr Adams.

“The unsustainable growth from the construction sector has waned as expected and the impact of low oil prices continues to reverberate through the economy.”

The strong consumer spending which has been a key driver of growth is set to slow as the fall in the value of the pound following the Brexit vote stokes inflation.

In a report published today the Item Club predicts that Scotland will probably avoid recession, with growth picking up to 1.2 per cent in 2018, compared with a trend rate of 2 per cent.

However, growth will not be strong enough to prevent Scotland losing thousands of jobs in the next two years.

The gap between Scotland and the UK is set to widen.

Experts at accountancy giant EY, which sponsors the Item Club, said the gloomy forecast put the onus on the Scottish Government to use the increased powers it is set to receive to boost growth.

However, businesses also need to play their part by adapting their strategies to suit changing conditions.

Mark Harvey EY’s senior partner in Scotland, noted the country has emerged from even tougher times than are in prospect.

He added: “We look likely to avoid another recession and it will be up to how government and the right policies can stimulate growth in these volatile times, how business can retain its confidence and stewardship, and how with an entrepreneurial mindset we can seek to create opportunity.”

Much will depend on how well policymakers support growth in Scotland’s seven cities, which account for around 60 per cent of its output in total.

The Item Club reckons growth in Glasgow and Edinburgh will average 1.3 per cent and 1.6 per cent respectively in the 2016-19 period.

Information and communications technology will be the fastest growing sector in Glasgow, where employment should remain steady.

Growth in the professional, scientific and technical services sector in Edinburgh will offset a fall in financial services jobs, resulting in a modest increase in employment.

Around 4,000 jobs will be lost in Aberdeen by the end of 2019 on top of the 3,000 shed by oil and gas firms this year.

The slowdown in growth will hamper efforts to rebalance Scotland’s economy.

While the fall in the pound following the Brexit vote has boosted manufactured exports, this followed a period of poor performance. Food and drink firms outperformed in the first half increasing output by nine per cent.

The prospect of Brexit raises uncertainty about trading links with UE countries and may make it harder to attract investment.

But the Item Club said: “A “hard-Brexit” would not mean the end of Scottish trade with the EU. In many cases the tariff costs borne are modest and currently more than offset by sterling’s depreciation.”

Employment will fall by 7,000 in Scotland in 2017, with more job losses likely in 2018.

The Item Club thinks the UK economy will grow by 1.9 per cent this year, by 0.8 per cent in 2017 and by 1.4 per cent in 2018.

Scottish GDP grew 1.9 per cent in 2015, against 2.3 per cent in the UK.