Vaccine progress could fuel 8.2% GDP rebound

EAST Renfrewshire is likely to face the least-steep fall in economic output of any area of Scotland this year amid the coronavirus crisis, with Orkney and Shetland hit hardest, analysis by KPMG has concluded.

The accountancy firm has revised its projection of the slump in Scottish economic output this year to 9.1 per cent, from the 8.1% it had projected in June, albeit this would be a less-sharp drop than forecast for the UK as a whole. KPMG predicts Scotland’s economic output can bounce back by 8.2% next year if a Covid19 vaccine is rolled out by April 2021.

It projects, on this basis, that Scotland can regain its “pre-covid” level of output by early 2023. But the firm cites potential for a no-deal departure by the UK from the European single market, when the transition period ends on December 31, as a factor which could hamper recovery.

KPMG’S forecasting model suggests Orkney and Shetland will this year experience respective falls in economic output, on the gross value-added measure, of 11.4% and 11.1%. The firm projects East Renfrewshire’s output will drop 7.4% this year, before rising by 7.6% in 2021.

Catherine Burnet, who chairs KPMG in Scotland, said: “Our latest revised forecasts for Scotland highlight the scale of uncertainty facing the country over the coming months. The next six months could provide the greatest challenge as the business community wrestles with both the

‘new normal’ of a postcovid-19 world and a potential hard Brexit.”

KPMG projects UK unemployment on the International Labour Organisation measure could surge to more than 9% in the fourth quarter, from less than 4%, with the UK Government’s coronavirus job retention scheme due to end in October.

The firm forecasts UK economic output will drop 10.3% this year, rather than by the 7.2% projected in June, before rising by 8.4% in 2021 if a vaccine is rolled out by next April and the UK agrees a deal with the European Union on the future relationship.