Fraser of Allander Institute

  1. Economy output may be contracting by a quarter

    Douglas Fraser

    Scotland business & economy editor

    Output from the economy may be contracting by as much a quarter during the time the current lockdown continues, according to a leading authority on the Scottish economy.

    The Fraser of Allander Institute has run a rough calculation of how different sectors are being affected by the sudden stoppage of much activity, assuming it lasts for three months.

    It has used current evidence, then weighted them according to their proportion within the economy.

    It estimates that construction output could be falling by up to half. It represents around 6% of the economy.

    The dominant services sector, including retail and despite a boom in online shopping, is falling by up to 20%, under this modelling.

    Within that, it's well known that retail, along with the category of accommodation and food, are among the hardest hit sectors.

    With large parts of these mothballed, the forecast is for "a very significant contraction".

    Production, which includes manufacturing, is falling by up to 30%, according to the estimates while demand for energy is down while offices and factories go unused.

    The fall in output, estimated at between 20 and 25%, is described as "completely unprecedented", and the Strathclyde University economists note that the effect will not be felt uniformly across Scotland.

    For comparison, a recent forecast for the impact on the US economy was on the same scale. Bank of America calculated that there could be a 30% drop in output during the second quarter of 2020, followed by a 30% rebound in the fourth quarter.