Ruined economy ‘will take years to return to normal’

SCOTLAND’S economy could take three years to recover from the coronavirus crisis despite the roll-out of a vaccine.

A respected think-tank has warned that it could be late 2023 before the economy returns to pre-Covid levels.

It means the country faces the threat of more economic turmoil and mass job losses as businesses struggle to survive.

The ‘grim’ findings by the Fraser of Allander Institute led to renewed calls for faster action by SNP ministers to get Scotland’s battered economy moving again and to help hard-hit firms.

Scotland’s economy shrank by 3.2 per cent in the first three months of this year as Covid struck, then collapsed by 19.4 per cent in the second quarter – the biggest decline recorded over a three-month period – before increasing by 14.7 per cent in the third quarter following the end of lockdown.

The new report, which takes into account the arrival of the vaccine, gives a ‘central scenario’ that the economy will bounce back to pre- Covid levels in August 2022. It said a pessimistic scenario involving business closures, rising unemployment and a slow roll-out of the vaccine would result in the Scottish economy not reaching pre-pandemic levels until September 2023.

However, in light of the vaccine’s arrival, the institute said there is ‘a greater likelihood of an optimistic scenario’ than in previous reports.

It said unemployment will rise to 7.5 per cent by the second quarter of next year – around double the normal rate in recent times.

The report said: ‘With unemployment soon to rise and a renewed squeeze on wages across the public and private sector, it will feel like Scotland is in a recession for some time yet.’

It said there is ‘tentative optimism’ for the year ahead, but it will still be ‘some time’ before significant restrictions ease, which will ‘continue to have a particularly heavy toll on key sectors in our economy such as tourism and hospitality’.

It also said the roll- out of a worldwide vaccination programme will take many months, meaning the global outlook – crucial for Scotland’s exports and investment prospects – remains hugely challenging.

Mairi Spowage, the institute’s deputy director, said: ‘Businesses which have survived to this point are likely to still face significant challenges to get through to the point where any economic recovery will be fully under way.

‘We have seen in recent weeks the decline of major employers whose demise has been caused or exacerbated by the Covid crisis... Activity is still well below pre-pandemic levels – and economic activity is likely to have taken a further hit as restrictions were reintroduced over October and November.’

She said ‘it may well require further restrictions in January to get the virus back under control’, adding: ‘And we should not forget, of course, the end of the EU exit transition period in just over two weeks’ time, which will lead to disruption for many firms who have weathered the Covid crisis thus far.’ The institute said the Scottish Budget – to be delivered on January 28 – will be set against a background of significant uncertainty, inter governmental tensions that could be exacerbated by a No Deal Brexit and the Holyrood election in May.

Scottish Conservative economy spokesman Maurice Golden said: ‘This report makes for very grim reading. The SNP Government has to take the blame for not acting quickly enough to support the Scottish recovery. They hoarded around a billion pounds’ worth of support from the UK Government, all for cynical political reasons and to continue their campaign of manufactured grievances.

‘Even now they have agreed to spend it, it is too late.’

A Scottish Government spokesman said :‘ We fully understand the challenges facing the economy as we look to balance measures to suppress the virus and protect lives with keeping businesses open and trading viably.

‘We have invested over £1billion in economic recovery, on top of the original £2.3billion of business support and over £500million of further business support more recently.’

‘Not acting quickly enough’