Scottish economy in ‘deep recession’, figures confirm

Scotland’s economy is estimated to have shrunk by nearly a fifth between April and June compared to the first quarter of the year.

New provisional figures from the Scottish Government suggest gross domestic product (GDP) fell by 19.7 per cent in the second quarter of the year, after having fallen by 2.5 per cent in the first quarter.

This is in spite of a pick-up in economic activity in May and June.

The overall decline makes the Scottish and UK economies “among the worst performing in Europe”, the Scottish Chamber of Commerce (SCC) warned as it called for more urgent support for employers.

Dr Liz Cameron, SCC chief executive, said: “The collapse in Scotland’s GDP in the second quarter sets alarm bells ringing even if the fall was expected.

“These figures confirm the Scottish economy is in deep recession and intervention is required now to prevent real and lasting damage to the jobs market.”

She called on the Chancellor immediately to reduce employers’ national insurance contributions and introduce new measures such as an employee retention incentive – grant support to help employers in badly affected sectors like hospitality to hold onto their staff – as well as a recruitment incentive to support businesses to take on new staff.

“Without rapid intervention in the form of fiscal stimulus packages as well as cost cutting efforts such as rates holidays, we fear that the Scotland’s economic landscape may never recover to previous levels,” she said.

The SNP called on the UK Government to extend its furlough scheme until 2021 following indications that Germany’s government could keep its version of the scheme going for 24 months.

The party’s economy spokesperson Alison Thewliss MP accused the Chancellor of “recklessly” ending the scheme in spite of a threat of a “tsunami” of job losses.

Pointing to thousands of job losses recently announced by Pizza Express and M&S, she said: "In the past few weeks alone we have witnessed a growing number of firms outlining plans to lay off thousands of staff due to the challenges posed by the health pandemic.

“If the Tory government does not act now it risks creating unemployment levels on a scale not seen since the 1980s and forcing many firms to close their doors for good."  

Scottish Labour leader Richard Leonard called on the Scottish Government to act.

He said: “The colossal drop in Scotland’s GDP between April and June makes clear what we already knew: Scotland has one of the worst performing economies in Europe.

“With Scotland now deep into recession, we simply cannot afford to waste time.

“The Scottish Government must step up to the plate and produce a plan to kickstart Scotland’s economy in the forthcoming programme for government.

“We cannot cut our way out of this recession, nor can we allow thousands of jobs to go to the wall.

“Scottish Labour is clear: We need investment in manufacturing and support for businesses across Scotland to kickstart the recovery and we need a proper jobs guarantee scheme to protect the livelihoods of Scotland’s workforce."

The latest GDP statistics are drawn from the Scottish Government’s third monthly publication on the economic impact of the COVID-19 pandemic.

They are known as ‘experimental official statistics’ because they are drawn from limited data, and are subject to a high degree of uncertainty and likely to be revised.

Nevertheless, they demonstrate the volatility in the economy in recent months. In June, Scotland’s GDP was provisionally estimated to have increased by 5.7 per cent compared to May, and in May by 2.3 per cent compared to April (not including offshore oil and gas extraction), reflecting the easing of lockdown restrictions and the pick-up in business activity.

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But those rises followed a contraction of 19.2 per cent in April and 5.8 in March. GDP remains 17.6 per cent below the level in February, prior to lockdown.

The Scottish Secretary Alister Jack said: “The UK Government has put in place unprecedented measures to support people, right across the country, through the pandemic. 

“We are supporting almost 900,000 jobs in Scotland through the pioneering furlough and self-employed schemes and have loaned more than £2.3 billion to 65,000 Scottish businesses.

“This is on top of an extra £6.5 billion of funding for the Scottish Government.

“The UK Government is doing all it can to drive our economic recovery. That includes our £1k job retention bonus, a £2 billion Kickstart scheme to create thousands of high-quality jobs for young people, cutting VAT to restart tourism businesses and boosting hospitality businesses with our ‘Eat Out to Help Out’ scheme.

“We know that there are very real challenges ahead of us. The UK Government will continue to do everything possible, working with the Scottish Government, to support people in Scotland through this difficult time.”

The figures suggest that Scotland’s economic recovery in June was slower than the UK’s overall, at 5.7 per cent compared to 8.7 per cent.

Scotland opened up retail slightly later in June than other parts of the UK but the difference between the two figures is also within the margin of error.