OUTPUT in Scotland will slump this year as the coronavirus triggers the worst economic downturn in modern times although the pace of decline will be slightly slower than in the UK, experts have predicted.
Economists at accountancy giant KPMG have forecast that Scotland will record a 6.8 per cent fall in output this year compared with a 7.2% decline for the UK.
The prediction is based on modelling which KPMG said highlights the scale of the challenges ahead, with no clear end in sight to the current crisis.
Catherine Burnet, Scotland Regional Chair at KPMG, warned: “Considerable uncertainty remains around the timing of a vaccine which will impact the timing and speed of the recovery, as well as the extent of any permanent damage to the economy.”
READ MORE: Behavioural expert warns coronavirus could spark street riots
KPMG said it is unlikely the economy will be able to fully restart until a vaccine is available to allow social distancing measures to be removed or effective treatments for the coronavirus are developed.
Assuming a vaccine is available by mid-July next year, the firm reckons Scotland and the UK will return to growth in 2021.
Output is expected to increase by 3.4% in Scotland in 2021 and by 2.8% in the UK.
But the growth rates would likely be lower in the event of a hard Brexit.
The transition period following the UK’s formal departure from the European Union is due to end on December 31.
“An end to the transition period with no deal, or with a more limited trade deal, would see a much weaker economic recovery next year,” said KPMG.
The firm reckons a dramatic increase in unemployment is in prospect even if the UK completes the Brexit process with a fuller trade deal in place.
READ MORE: Michel Barnier accuses Boris Johnson of reneging on Brexit commitments
It has predicted the UK-wide unemployment rate will average 8.6% this year and 11% in 2021.
The support the Government has provided for employers in key sectors such as hospitality to preserve jobs under the furlough scheme may come to an end before they can return to normal trading.
James Kergon, senior partner at KPMG in Glasgow, noted: “The gradual winding down of the Job Retention Scheme may well result in a sudden change in fortunes for many workers throughout Scotland.”
He added: “There is some optimism, though, in the figures. A number of English regions have a particularly narrow concentration of industries, placing them at higher risk of economic damage. Scotland’s economy has diversified significantly over recent years, which should help to mitigate some of the impact we’ll feel from the most at-risk sectors, including tourism, hospitality and retail.”
The predictions are based on a central scenario considered by KPMG. Modelling completed by the firm suggests all areas of Scotland will be hit hard by the economic fallout from the coronavirus although some will fare notably worse than others.
Aberdeen City is expected to suffer the biggest impact thanks to its reliance on the oil and gas sector. North Sea firms are slashing spending and jobs in response to the oil price plunge triggered by the coronavirus.
READ MORE: Chief executive quits at pioneering Shetland oil firm as hopes of boom in area fade
Output is expected to fall by 8.6% in the Aberdeen city local authority area this year then to rise by 3.8% in 2021.
“Before lockdown, the North East was already facing major economic challenges as the energy sector battled with oil price fluctuations and a global effort to move towards significant climate reduction targets,” said Martin Findlay, senior partner at KPMG UK in Aberdeen.
KPMG reckons output will fall by 6.7% in the Glasgow City Council area this year and increase by 4.4% in 2021.
The city of Edinburgh area is expected to suffer a 6.4% fall in output this year followed by a 2.6% increase.
READ MORE: Wild game specialist doubles sales as lockdown encourages venison eaters to shop online
West Lothian is set to fare best with a fall on 5% followed by a rise of 3.6%. A spokesman for KPMG noted the area has a broad economic base.
If a vaccine for the coronavirus is not found until the end of 2021 KPMG reckons output in the UK will decline by 7.2% in 2020 and increase by 0.9% in 2021.
Output rose by 1.2% in Scotland in 2019 and by 1.4% in the UK.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel