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Furlough providing a ‘mask’ for threats to economy

Tim Allan: ‘always darkest before dawn’

First signs of a return to confidence in “the most challenging year in living memory” could not conceal underlying and long term threats to the economy, according to a key survey.

It found that some Scottish sectors such as financial and business services, as well as manufacturing, saw confidence return to positive territory in the final quarter for the first time in 2020.

However, all sectors remain negative on plans for investment, which is dampening hopes of a recovery.

In its final quarterly indicator – before the end of the Brexit transition period – the Scottish Chambers of Commerce and Fraser of Allander Institute found that the extension of the furlough scheme continued to mask the worst impacts of the pandemic and “is not a panacea to the real risk of mass unemployment over the spring.”

Tim Allan, president of the SCC, said: “Last year was the most challenging year in living memory for many of us. In addition to the risk to health we all face as a result of Covid-19, restrictions imposed have created an ongoing recession and a jobs crisis which will likely take years to recover from.”

His comments echo the Fraser of Allander’s survey before Christmas when it warned that the recovery could take three years.

“We were hoping 2021 would be a better year than 2020 but it seems it is always darkest before the dawn,” said Mr Allan.

“We fear the restrictions that have been imposed to prevent the spread of the new variant of the virus will continue to destroy more jobs and businesses unless government support can ease the impact of closures and deliver an environment to enable economic recovery.

“Investment, particularly in green jobs and energy transition, will be key if the economy is going to be built back better and sustainably.

“For this to happen governments at all levels must be prepared to work hand in hand with the business community to attract and focus investment on where it will have the greatest impact.”


Mairi Spowage, deputy director Fraser of Allander Institute, said: “We have discussed for some months the prospect of a “K-shaped” economic recovery in Scotland. This is the idea that different sectors have been impacted very differently by the lockdown measures and have experienced divergent pathways in recovery. 

“We can see from today’s survey results that hospitality and tourism in particular has been badly impacted, with further lockdown measures likely to cause more hardship for the industry.

“Other industries, such as construction, have been able to adapt to the restrictions they face and operate almost at full capacity, but possible announcements on further restrictions for this sector are likely to act as a new blow.

“The length of any new lockdown on construction will be key to the ripple effects this has for the wider economy.

“In these challenging and uncertain times, the Scottish Government will set out their (its) budget for 2021-22 on 28 January.

“The backdrop to the budget will be significant uncertainty around the economic and health outlook; ongoing intergovernmental tensions on a variety of matters including funding flexibility and certainty; and of course the Scottish elections in May.

“Businesses are likely to hope for a range of measures in the form of continued government support and practical proposals to stimulate economic recovery.’’

Cities face toughest challenge, says think tank

Cities are likely to find it more difficult to recover from the pandemic than rural areas according to the leader of a tourism think-tank.

Professor John Lennon, director of the Moffat Centre at Glasgow Caledonian University, warned that this could leave the majority of hoteliers ‘on the edge’ of survival.

He said areas such as the north of Scotland had experienced a boom after the first lockdown was eased as visitors with unspent cash from months of staying indoors flocked to the “safer” countryside.

By contrast, cities such as Glasgow, Edinburgh and Aberdeen, traditionally seen as the backbone of tourism expenditure, continued to suffer the crippling combined effects of fewer foreign and domestic visitors, conferences and live events.

Prof Lennon said domestic tourism could benefit from Brexit as those seeking a break were deterred from travelling abroad by the rising costs and added bureaucracy of foreign trips.

However, anxiety over crowded cities is likely to remain even after the majority of the public is vaccinated, he said.

The Moffat Centre at Glasgow Caledonian University advises the Scottish Government on policy.

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