Scotland in 'deep recession' as coronavirus bites economy

Scotland’s economy has entered a “deep recession” as new figures suggest GDP plunged by a fifth in the second quarter of the year.

Provisional Scottish Government statistics suggest the country’s GDP fell by 19.7% during April to June as the coronavirus lockdown bit.

It follows a 2.5% drop in economic growth in January to March, with the Scottish Chambers of Commerce (SCC) warning Scotland and the UK’s economies are among the “worst-performing in Europe”.

Over both quarters, output is estimated to have fallen by a total of 21.7%, with the SCC saying the figures should “set alarm bells ringing”.

Scotland’s recession is expected to be confirmed by official quarterly figures in September and follows the UK formally entering recession for the first time in 11 years last week.

Scottish economy secretary Fiona Hyslop said the numbers show the “devastating and unprecedented impact” of the lockdown brought about by coronavirus.

But the Scottish economy actually grew by 5.7% in June in the latest sign of the beginnings of a slow recovery from the Covid-19 pandemic.

The “experimental” monthly GDP statistics show output increasing in all of the Scotland’s main industry sectors in June as the country’s reopening began to pick up pace.

The 5.7% rise in growth followed a 2.5% boost to GDP in May.

But it came after economic output plummeted by 19.2% in April as the lockdown took effect, and by 5.8% in March.

Even with the increases over the last two months, output remains 17.6% lower than pre-pandemic levels in February.

The economy secretary said: “Although the estimated figure for June shows that Scotland’s GDP has increased, the estimate for the quarter shows the devastating and unprecedented impact that the necessary lockdown restrictions have had on the economy.

“We have worked hard to protect Scotland’s economy and ensure that as many people as possible keep their jobs and this is supported by a package of support to businesses that totals over £2.3bn.

“Since May we have started to see our economy open up as lockdown restrictions in Scotland have been eased and in order to help businesses safely restart, we have put in place a £230m economic stimulus package and provided businesses with guidance and support.”

Hyslop repeated her call to the UK Government to extend its furlough scheme to protect jobs.

But Scottish secretary Alister Jack said the UK Government is “doing all it can” to help workers and businesses.

Jack said: “These figures confirm the significant impact of coronavirus on Scotland’s economy.

“The UK Government has put in place unprecedented measures to support people, right across the country, through the pandemic.

“We are supporting almost 900,000 jobs in Scotland through the pioneering furlough and self-employed schemes and have loaned more than £2.3bn to 65,000 Scottish businesses.

“This is on top of an extra £6.5bn of funding for the Scottish Government.”

The Scottish secretary added: “The UK Government is doing all it can to drive our economic recovery.

“That includes our £1k job retention bonus, a £2bn Kickstart scheme to create thousands of high quality jobs for young people, cutting VAT to restart tourism businesses and boosting hospitality businesses with our ‘Eat Out to Help Out’ scheme.”

Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce, said further intervention is now required, such as a cut to employers’ national insurance contributions, and fresh incentives for firms to retain staff.

She said: “The collapse in Scotland’s GDP in the second quarter sets alarm bells ringing even if the fall was expected.

“The 19.7% decline from April to June makes Scotland’s and the UK’s economies among the worst performing in Europe.

“These figures confirm the Scottish economy is in deep recession and intervention is required now to prevent real and lasting damage to the jobs market.”

Dr Cameron added: “Without rapid intervention in the form of fiscal stimulus packages as well as cost cutting efforts such as rates holidays, we fear that the Scotland’s economic landscape may never recover to previous levels.”