Economy 'will pick up' next year

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Growth in the Scottish economy should pick up early next year, experts have predicted.

Research by Bank of Scotland suggests economic growth will be sluggish and likely to remain below 2% in 2007.

However, it is anticipated that this will rise in 2008, with data showing consumer confidence has improved in recent months.

Along with a strong business sector, the bank believes this indicates increasing economic growth next year.

Experts also said the strong labour market would assist growth.

Consumer spending

The data is contained in the bank's index of leading economic indicators.

Bank of Scotland group economist Tim Crawford said: "Early indications are that 2008 will see an improvement in Scottish economic conditions, potentially led by a resurgence in Scottish consumer spending and strength in the business sector."

However, he added: "Higher interest rates are starting to weigh on the Scottish economy, and this suggests that growth may be slightly below 2% in the second half of 2007."

The findings come at the same time as a survey of small and medium-sized businesses found the highest levels of optimism since 2004.

The KPMG study found 64% of companies questioned predicted a positive outlook, with 76% confident about their own prospects for the next 12 months.