Coronavirus in Scotland: Warning over economic impact of lockdown

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Image caption,
The lockdown has left Scotland's high streets largely deserted

The Scottish economy could contract by up to a quarter if the current lockdown restrictions continue for a three-month period, according to economists.

The Fraser of Allander Institute said there was likely to be a "long road to recovery" from the "unprecedented" economic impact of coronavirus.

It predicted the construction sector could contract by 40-50%, production by 25-30% and services by 15-20%.

Scottish GDP could contract by about 20-25% overall, the research said.

The report said its estimates were all based on a three-month period of restrictions and were not an "exact prediction for growth" over the next quarter but "simply an illustration of the scale of the shock" to the economy.

It also warned that it "might be many months or even years before we actually know the full extent of the effect of the shutdown on the Scottish economy".

Within the production sector, the collapse in the oil price has had a severe impact on the mining and quarrying industry, while electricity and gas supply has seen a decline in demand of roughly 10%.

In construction, the researchers said they were seeing "a shutdown in much of the housebuilding industry, and the mothballing of a large part of private construction infrastructure and repair".

Services, which is by far the largest part of the Scottish economy, will take a hit in retail and wholesale, transport and storage, and accommodation and food services, with the majority of the latter sector currently mothballed.

But there could be a "modest expansion" in the public sector and a "fairly modest" contraction in real estate.

The agricultural sector is predicted to grow by 2-5%, though even a 5% growth in this sector will add less than +0.1 to overall Scottish GDP.

'Economic recovery'

The report said: "Of course, many of these effects will be temporary. Once restrictions are gradually lifted, then we should see some of these sectors bouncing back.

"To what extent, we don't yet know. It is likely to be a long road to recovery."

The UK-side lockdown was introduced on 23 March, and it is not yet known when the restrictions will begin to ease.

Scotland's Economy Secretary Fiona Hyslop said the Scottish government was focused on minimising the long-term impact of coronavirus by ensuring businesses and workers got as much support as possible.

She added: "That is why in addition to UK-wide support for employees and the self-employed we have announced one-off grants for businesses to help protect jobs, prevent closures and promote economic recovery.

"The grant support is part of a package of measures worth £2.2bn and more than 90,000 ratepayers across Scotland will be able to benefit."