Tensions over jobs

Sunak resists furlough calls as Scots economy shrinks

Princes Street, Edinburgh

High streets have been badly hit (pic: Terry Murden)

The Scottish economy shrank by almost a fifth (19.4%) between April and June, prompting renewed demands from the Scottish government for additional borrowing powers and an extension to the furlough scheme.

However, Chancellor Rishi Sunak looks unlikely to grant either, nor agree to a sectoral approach to furlough favoured by Labour leader Sir Keir Starmer.

The SNP wants the current furlough scheme to be extended which it claims would save 61,000 jobs in Scotland. Mr Sunak has said he is looking for new ways to protect jobs after the unemployment rate hit its highest level in two years.

He believes that extending the furlough scheme would not help people find new opportunities.

Labour MSPs voted today against an amendment calling for the UK government to extend the furlough scheme – despite repeated calls for an extension from both Kier Starmer and Scottish Labour leader Richard Leonard.

The latest data on the Scottish economy showed construction contracted by 41.5%, the services sector by 18.7% and production by 15.7% as the lockdown took its toll.

Economy Secretary Fiona Hyslop said: “The coronavirus (COVID-19) pandemic has had an extremely serious impact on the economy right across the UK and – as these figures demonstrate – Scotland is no exception.

“It is now essential that the Scottish Parliament is granted the additional powers it needs to properly manage the response to the crisis as we move towards recovery.

“It is also the case that the last thing our businesses need is further economic turmoil as a result of a no-deal Brexit. That is why we have repeated our calls for the UK Government to agree an extension to the transition period.”

Andrew McRae, the Federation of Small Businesses’ (FSB) Scotland policy chairman, said: “By forcing thousands of businesses to shut up shop, we slammed the handbrake on the Scottish economy. These unsurprising statistics show the extent of the slowdown.

“Those firms that did the right thing now need the support policymakers to see them through to the recovery. That likely means no new pressures on business and ongoing support for firms still facing trade restrictions. 

“The last thing that Scottish firms need is another sea change in trading conditions. That’s why negotiators need to agree a small business-friendly EU UK trade deal quickly. Many operators simply don’t have the reserves to cope with another crisis.” 

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