SCOTLAND will avoid recession next year, despite Brexit chaos and key sectors being harmed by a shortage of workers, a new report from global finance giant Price Waterhouse Coopers has predicted.

In their latest economic outlook report, they say slower productivity could see growth in Scotland fall from 1.3 per cent in 2017 to 1.2 per cent in 2018, while UK growth falls from around 1.5 per cent to 1.4 per cent.

According to PwC, Scotland has the second highest proportion of EU workers in the UK after London.

Those sectors most reliant on European workers – food manufacturing, construction, hotels and restaurants and warehousing – are set to be hit by significant skills gaps being created.

David Brown, head of government and public services for PwC in Scotland, said: “The impact of Brexit on immigration from the EU will not be known for some time, but if numbers are reduced then government and businesses will need to work together to try and fill skills gaps.

“While enhanced training of UK nationals and automation might be a solution in certain sectors, if we look 10 to 20 years ahead, realistically, they are unlikely to make up [the gap] fully if there is any large reduction in EU migrant workers over the next five to 10 years.

“Healthcare, hospitality, retail and construction are particularly dependent on EU workers. It is important that not only do we take steps to retain the EU migrants already living in the UK, but we also consider carefully how to make provision for them in the new immigration system post 2021.”

Scottish ministers have repeatedly called for immigration to be devolved to Holyrood to allow for bespoke arrangements.

That call was backed by MSPs earlier this week when they voted for a differentiated and flexible immigration system for Scotland.

During the debate, MSPs heard that an ageing Scottish population will mean that over the next 25 years the number of pensioners will increase by 25 per cent while the number of working age people will rise by just one per cent.

Speaking during the debate, Europe Minister Alasdair Allan said: “Scotland’s demographic profile is simply different to the rest of the UK.

“In Scotland our population growth over the next 10 years is expected to come entirely – 100 per cent – from migration. This is a very significant divergence from the rest of the UK, and it is a divergence that we as a Parliament must address.”

He added: “It is simply impossible to overstate the critical role of migration in Scotland’s future growth and prosperity.”

While Scottish Tory MSP Jackson Carlaw acknowledged “a significant increase in the working age population” was needed, he said his party didn’t believe devolving immigration was the solution.

Labour MSP Lewis Macdonald said: “Brexit means that we need new answers to a range of questions facing Scotland today, including a new approach to immigration that reflects the different needs and priorities of the nations and regions of the UK.

“Addressing Scotland’s migration needs can indeed be done within the context of the United Kingdom without undermining either the UK single market or indeed a coherent UK immigration policy.”