Scottish economy may take three years to recover
Scottish employment figures have improved
Scotland’s economy may take three years to return to pre-pandemic levels, according to the Fraser of Allander Institute.
Its central scenario predicts a return to “normality” by August 2022, while the most optimistic prediction suggests February 2022 based on a successful vaccine programme.
But under a pessimistic scenario the Scottish economy would not recover to its former level until September 2023.
Whatever outcome emerges, unemployment is expected to rise to 7.5% by the second quarter of next year – double the current rate – as the furlough scheme is rolled back.
“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,” said the institute, based at Strathclyde University
The forecast is in line with predictions for other economies. Japan will suffer a smaller contraction this year than initially forecast but won’t return to pre-coronavirus pandemic levels until at least early 2022, economists in a Reuters poll said.
The world’s third-largest economy is expected to shrink 5.3% in the current fiscal year ending in March.
Analysts expected the economy to rebound 3.4% next fiscal year, unchanged from the November survey, but a recent resurgence in coronavirus cases could slow the recovery.
Scots jobless falls
For the period August to October, Scotland’s employment rate estimate has risen to 74.8% and the unemployment rate estimate has fallen over the quarter to 4.2%, the biggest fall of any UK region or nation.
Across the UK redundancies rose to a record high of 370,000. The unemployment rate rose from 4.8% to to 4.9%, the Office for National Statistics said.
Economists warned that leaving the EU without a deal risks a sharp rise in unemployment.
British Chambers of Commerce head of economics Suren Thiru said: “Failure to achieve a UK-EU trade deal risks adding to the longer-term structural unemployment caused by the pandemic by limiting the competitiveness and viability of some industries.”
Howard Archer, chief economic adviser to the EY ITEM Club, said: “The latest labour market report is weaker overall, but the weakness is less than feared.
“Should there be no trade deal between the UK and the EU, the EY ITEM Club suspects that the unemployment rate could rise markedly higher than the 7.0% peak rate currently forecast. Under a ‘no deal’ scenario, the unemployment rate could reach 8.5% as the economy is affected and business caution is magnified.”
Jack Kennedy, UK economist at the global job site Indeed, commented: “There are glimmers of hope and hiring is proving resilient for this time of year. Tens of thousands of new jobs are being posted on Indeed every week, and unlike last year the pace isn’t yet slowing in the run up to Christmas.
“However, the total number of vacancies is still 37% down on what it was a year ago, and with millions of people once again living under the strictest tier of Covid restrictions and the wider economy slowing, this gap reveals what a mountain the jobs market has to climb in 2021.”