‘Serious toll on individuals’ from unemployment surge is looming

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PREMIUM

By Ian McConnell

Business Editor

A “SERIOUS toll on individuals” is still to come from a looming surge in unemployment, and significant parts of Scotland’s economy face worsening conditions amid the coronavirus pandemic before restrictions ease, experts fear.

These grim warnings from Scottish Chambers of Commerce and the University of Strathclyde’s Fraser of Allander Institute come in their latest quarterly monitor, published today.

Mairi Spowage, deputy director of Fraser of Allander, warned of a further major impact on unemployment, which has jumped in the UK since the onset of the pandemic, as the UK Government’s coronavirus job retention scheme is “rolled back”. This programme, through which the taxpayer supports the incomes of furloughed workers, has been extended until the end of April, she noted.

Ms Spowage, who flagged further difficulties ahead for the particularly hard-hit hospitality and tourism sectors amid lockdown measures, said: “A key feature of this crisis has been the unprecedented levels of government support that have been put in place to help businesses and individuals get through. A vital measure has been the UK Government’s furlough scheme, which has now been extended to the end of April 2021. This has been widely welcomed by businesses.”

She added: “Despite this, there is likely to be a serious toll on individuals still to come, with unemployment likely to rise significantly as this scheme is rolled back. The overall impact on jobs is likely to be dependent on the way that this scheme is wound down or adapted to new circumstances in the economy.”

Scottish Chambers of Commerce president Tim Allan said of the survey findings: “Significant parts of the Scottish economy face worsening conditions due to the pandemic before restrictions are set to ease this year.”

And he warned: “We fear that restrictions 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.”

Ms Spowage highlighted the fact that specific sectors had been “impacted very differently by the lockdown measures and have experienced divergent pathways in recovery”.

She said: “Of course, these restrictions are necessary to protect public health; and in the end this is what will ensure Scotland is in a position to recover successfully when restrictions can be eased.”

Ms Spowage added: “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.”

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The Scottish Chambers-Fraser of Allander survey, to which 365 firms responded, flags huge pressures on the tourism sector, in which nine out of 10 firms reported lower or unchanged employment.

And tourism firms reported record-low expectations for the first quarter, which Scottish Chambers said indicated “the scale of the challenge that many in the sector face for their very survival”.

Sales revenue was down heavily in the fourth quarter in the retail and wholesale category, in which 84% of firms reported lower or level staffing.

In financial and business services, sales revenues rose in the fourth quarter, although the survey signalled a fall in staffing in this sector.

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The picture in manufacturing was mixed, with strength in exports more than offsetting weakness in the domestic market to result in an overall rise in sales revenues in the fourth quarter. However, manufacturing employment fell.

In construction, sales revenues fell but new contracts rose in the fourth quarter. Scottish Chambers noted this perhaps reflected “pent-up demand being unleashed – particularly in the housebuilding sector”.

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