State of the Nation: COVID-19’s impact on Scotland’s economy
With more official or authoritative data and forecasting being released in recent days and weeks – as summarised and analysed in our latest State of the Nation briefing – we are now getting clearer a sense of just how severely the COVID-19 pandemic and ‘lockdown’ has impacted the Scottish economy in such a short period.
Steep decline in economic activity
Economic activity in Scotland’s private sector almost halved in March, its steepest decline on record. Scottish retail sales were their worst-ever in the same month. Consumer spending could fall by 50%. Global oil prices fell to historic lows.
The Scottish Government’s Chief Economist forecasts a contraction so severe as to wipe out a third of Scotland’s GDP. Similarly, the Office for Budget Responsibility forecast a 35% fall in UK GDP in Q2 2020. A long and difficult recovery is widely anticipated.
Businesses at risk of collapse
When asked how long they could survive if current conditions and trading persist, 54% of businesses in Scotland said less than 3 months. A further 32% said between 4 and 6 months.
In other words, a staggering 86% of Scottish businesses are concerned they may no longer exist by the end of 2020.
Coronavirus Job Retention Scheme protecting millions of jobs
The unprecedented business support and funding delivered by the UK Government and the Scottish Government has made an impact. More than 2.2 million UK employees have been furloughed under the Coronavirus Job Retention Scheme.
But Scottish employers shed jobs at the fastest rate in over two decades in March – and at a faster rate than firms UK-wide. 51% of Scottish businesses report reduced staff headcount and 81% reduced staff working hours.
But unemployment continues to rise
Nearly 1.5m new applications for Universal Credit have already been made by the recently unemployed. The Office for Budget Responsibility expects UK unemployment to rise by 10% and recover at a slower rate than GDP.
According to the Resolution Foundation, unemployment could peak at almost 5m people (14.1%) if disruption lasts for six months – or at over 7m (20.8%) in 12 months.
Much more to do
The stark reality of these data and forecasts demonstrates that there is still much to do to save lives and livelihoods. SCDI continues to harness the collective voice of our members to inform and influence action by government and others.
For more, download our latest State of the Nation briefing below, which brings together all of the latest data and forecasts in one place.