50,000 Scots could lose their jobs in recession

FIFTY thousand people in Scotland could lose their jobs over the next two years as the recession hits, economists predicted today.

A "rapidly deteriorating situation" is causing the effects of the economic downturn to be felt harder in Scotland than in the rest of the UK.

The latest forecast from the Fraser of Allander Institute said "exceptional" losses facing Scottish banks RBS and HBOS will have a lingering impact on many sectors.

The institute said recession was likely in 2009, with negative GDP growth at -1.1% before picking up the following year to 0.7%.

Estimates suggest 37,000 job losses next year, with a further 12,000 in 2010.

The scale of the downturn is not likely to be as severe as the 1980/81 recession however.

The commentary published today is backed by PricewaterhouseCoopers LLP.

Senior partner in Edinburgh Paul Brewer said: "The latest economic forecast points to a rapidly deteriorating situation for many sectors of the Scottish economy.

"Combined with a backdrop of impaired lending capacity on the part of our two major clearing banks, it indicates there are significantly heightened risks for business.

"Just as bankers, economic forecasters and governments underestimated the speed and severity of the financial crisis and how quickly it has affected the wider economy, many companies may not yet realise how quickly their trading position could worsen in the current climate."

The Fraser of Allander Institute, based at the University of Strathclyde, said the impact of falling property prices will be felt less in Scotland than in the rest of the UK, but the fall-out from struggling banking and financial services is likely to be greater.

As well as their central forecast, the economists produced a further three possible scenarios for the coming years: an optimistic outlook; a recession followed by slow recovery; and a sustained recession.

The most positive scenario sees a 2009 fall in GDP to –1% but a return to pre-downturn levels of growth by 2012.

In the case of a sustained recession forecasters predict negative growth for two consecutive years of –1.6% in 2009 and –0.4% in 2010, resulting in 117,000 people losing jobs. By 2012 the economy would see a return to this year's expected growth rate of 0.7%.

Strathclyde professor of economics Brian Ashcroft said: "In the latest commentary we seek to identify the transmission mechanisms through which this impact will occur and the likely effects.

"However, the heightened levels of uncertainty and lack of evidence on the likely strength and duration of specific effects have led us, on this occasion, to produce three alternative scenarios alongside our central forecast."

Frank Blin of PricewaterhouseCoopers LLP said: "Early action to address cash flow and funding is a real priority.

"Aligning stakeholder support including lenders, suppliers, creditors and shareholders is crucial.

"The mantra should be 'no surprises'.

"Having said all this, for those who are cash rich, there will be opportunities."

The total number of Scots unemployed over the last three months stands at 126,000, a rise of 13,000 on the previous quarter.

But the new figure is still 4,000 fewer than during the same period last year.

The figure for the UK as a whole rose to 1.82 million, an 11-year high.

On the more traditional method of calculating unemployment – counting the number of people claiming jobseekers' allowance – the figure has also gone up.

This total in Scotland increased by 3,300 in October to 85,400 – a rise of 12,800 on October last year.

Commenting on the unemployment figures, Scottish Secretary Jim Murphy said: "Economies all over the globe are facing challenging times, and the Scottish labour market is not immune.

"The Scottish economy has enjoyed a sustained period of success but we can't afford to assume this will continue, and it's essential that we don't wait for someone to lose their job before we start to help but get the ball rolling before it happens."

The Government is to double the funding for its "rapid response" service and Mr Murphy said this will be offered in areas of Scotland that could be hit with redundancies.

He listed other moves, like the bank rescue package and housing support and energy efficiency – "and we continue to invest in the New Deal to help people find new jobs quickly if the worst should happen."

On today's figures, the Scottish unemployment rate over the last three months rose by 0.5% to 4.7%, although the UK rate is higher at 5.8%.

Calculated on the monthly claimant count method, the rate went up by 0.1% to 3.1%

Back to the top of the page