Scotland faces a third consecutive year of slowing GDP growth and the poorest year for economic growth since 2012, according to the latest report from the EY Scottish ITEM Club.

EY said the fallout from the oil price slump continues to permeate the Scottish economy, as does underperformance of Scotland’ service sector, “with many areas of the service sector performing poorly in comparison to UK peers.”

“While still expanding, Scotland’s gross domestic product (GDP) growth for 2016 has been downgraded to 1.2% representing a 0.6% decrease from the prediction EY Scottish ITEM Club 2016 Forecast released six months ago,” said EY.

The report said that as the negative impact on growth of low oil prices fades in 2017 and 2018, the pace of expansion should pick up, with an output increase of 2% expected from 2017.

“The findings of the EY ITEM Club report are a cause for concern, and confirm the significant impact on the Scottish economy of the low global oil price,” said David Mundell, the UK Government’s Secretary of State for Scotland.

“The UK Government is determined – working with the Scottish Government – to do everything possible to boost Scotland’s economy, its productivity and protect jobs.

“We have in place an ambitious plan to support economic growth right across the country, investing in infrastructure and backing businesses.

“That includes investing hundreds of millions in UK City Deals right across Scotland, and supporting the oil and gas industry with tax measures worth £2.3 billion.

“I have just returned from a visit to Dallas and Houston in the USA, lobbying for further investment in Scotland’s oil and gas industry, and supporting Scottish companies exporting skills and services.

“We are taking action now to build a bridge to the future of the North Sea, which is such a significant part of Scotland’s economy.”