Chief economist warns that 100,000 Scottish jobs could go by Christmas

Dan Sanderson
·3-min read
The grim warning was issued by the Scottish Government's top expert - Phil Noble/Reuters
The grim warning was issued by the Scottish Government's top expert - Phil Noble/Reuters

Nearly 100,000 people in Scotland are predicted to lose their jobs by Christmas due to the economic fallout from the coronavirus pandemic.

Gary Gillespie, the Scottish Government’s chief economist, warned that the unemployment rate could almost double to 8.2 per cent in the fourth quarter of this year, following the end of the furlough scheme next month.

According to the most recent figures, there are currently 128,000 people unemployed in Scotland, a rate of 4.6 per cent. The furlough scheme has been credited with preserving more than 700,000 jobs.

However, in an economic update, Dr Gillespie said: “Unemployment in Scotland may peak at around 8.2 per cent in the fourth quarter. This will be heavily influenced by the ability of the Job Support Scheme [the replacement to furlough] to retain levels of employment during a period in which many jobs may not be considered viable and the extent to which businesses may need to restructure and reduce staffing levels.”

He also predicted that it may take until the end of 2023 for the economy to return to pre-crisis levels, a far more pessimistic scenario that some other economists have set out.

At Holyrood, Kate Forbes, the SNP finance secretary, described Rishi Sunak’s job support scheme as a “poor and narrow substitute” for furlough.

Kate Forbes, the Scottish finance secretary - Andrew Milligan/PA
Kate Forbes, the Scottish finance secretary - Andrew Milligan/PA

It will see workers get three quarters of their normal salaries for six months. However, government contributions to wages will fall dramatically. Initially the UK Government paid 80 per cent of a monthly wage up to £2,500 under furlough - but under the new scheme this will drop to 22 per cent.

The Chancellor has said the scheme is designed to protect “viable” jobs rather than those that continue to exist only because of government schemes.

“The Treasury’s own illustration makes clear that the scale of their contribution to supporting individuals has plummeted, with the burden falling on hard-pressed employers to provide the majority of the support,” Ms Forbes said.

“I’m under no illusions, despite these announcements, jobs will be lost, the economy will be more fragile and the recovery is going to be challenging.”

Meanwhile, economists at the Fraser of Allander Institute, at the University of Strathclyde, warned that the country’s economy faces "taking a step backwards" because of the spike in coronavirus cases.

Professor Graeme Roy, the institute's director, said: "History is likely to judge the Chancellor's decision to pay 80 per cent of workers' wages during the height of the lockdown as one of the most effective policy responses to any economic crisis in history. Over nine million workers have benefited.

"The new scheme is very different, and given the relatively minor subsidy it provides for wages, it is unlikely to protect jobs, hours and incomes in those sectors who are really suffering."