£56M -A-DAY HIT TO ECONOMY
Eye-watering cost of lockdown... and Scotland’s suffering worse than UK
EACH day of lockdown is costing the Scottish economy more than £56million, according to research for the Daily Mail.
The Centre for Economics and Business Research (CEBR) found that UK-wide output is £521million a day lower than before the pandemic, equating to about £56.2million north of the Border or £20.5billion for 2020.
This is proportionately more than experts had predicted and the CEBR said ‘differing degrees of restriction measures could... explain Scotland’s relatively larger contribution to the UK’s overall economic losses’.
The CEBR said ‘much activity [had been] curtailed across the Central Belt in light of growing case numbers’ near the end of last year. At the end of December, 282,800 workers (11 per cent of total jobs) in Scotland were furloughed – with six million on furlough in the UK.
As well as a collapse in output, the UK Government is borrowing almost £1billion a day to pay for measures including the furlough scheme and tax breaks for struggling businesses.
Last night, Scottish Government economic adviser Richard Marsh said: ‘Scotland has been vulnerable compared to other parts of the UK due to a loss in both international and domestic tourism.’
Business leaders and economists said the success of the vaccine programme meant Covid restrictions should be lifted more quickly.
Lord Rose, chairman of Ocado and former chief executive of Marks & Spencer, said: ‘The economy is going to hell in a handcart. The Government is terrified of its own shadow. It’s time to move on.’
The UK economy contracted by 9.9 per cent last year, the biggest reverse since the Great Frost of 1709.
With the country back in lockdown, output is expected to contract by another 4 per cent in the first three months of this year. Unemployment in the UK is forecast to hit 6.5 per cent by Christmas – leaving 2.2million out of work, 900,000 more than at the end of 2019.
The total bill for dealing with Covid is expected to hit £407billion as the cost of furlough, higher benefits payments and grants for companies and the self-employed mount. The colincome lapse in economic activity has also hit tax receipts as incomes, profits, spending and investment fall.
In January, experts warned Scotland will face an ‘economic shock’ of huge job losses and business closures due to the lockdowns.
The Scottish Government’s economic forecaster said it could take three years for the economy to reach pre-pandemic levels – with the latest lockdown causing the value of the economy to shrink by around 5 per cent in the first quarter of this year.
Unemployment will soar from 4.4 per cent now, or 123,000 people, to 7.6 per cent during the second quarter of this year, according to the Scottish Fiscal Commission (SFC).
Meanwhile, the UK Government is set to borrow a record £355billion in 2020-21 and £235billion in 2021-22 to pay for higher spending and lower taxes. This will push UK debt to a peak of 109.7 per cent of national – the highest level since the aftermath of the Second World War.
The Bank of England’s chief economist, Andy Haldane, predicted in the Mail last month that the economy will open back up like a ‘coiled spring’ as households will want to spend quickly the £250billion they will have saved by June.
But Christopher Snowdon, head of lifestyle economics at the Institute of Economic Affairs, said promising to ease the lockdown on the basis of ‘data not dates’ and then insisting dates cannot be brought forward meant ministers had ‘created a oneway ratchet’.
The costs of the pandemic are concentrated in sectors such as hospitality and retail, said Kay Neufeld, CEBR head of forecasting, but if the virus is contained ‘we will be able to safely open up... raising output by as much as £512million per day’.
Tracy Black, CBI Scotland director, said government and business must work together on a ‘recipe for success’ for Scotland’s economy.
‘Going to hell in a handcart’