Economic recovery in Scotland dependent on beating virus, says Nicola Sturgeon

The only solid basis for a sustained economic recovery in Scotland is a population not facing “the threat of a rampaging virus”, Nicola Sturgeon has said, as a new report warned economic output in the country could drop by a third during lockdown.

Covid-19 has resulted in an “economic crisis” north of the Border, the First Minister said as she announced the number of people who have died after testing positive for the disease is now 985.

Analysis published by the Scottish Government predicts gross domestic product could fall by around 33 per cent during the current period of social distancing - similar to previous estimates made by the UK Government.

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The report’s author, chief economist Gary Gillespie, stressed that businesses were dealing with “no ordinary economic downturn” and urged them to seek the financial support already on offer.

Nicola Sturgeon said she was aware of the economic impact caused by lockdownNicola Sturgeon said she was aware of the economic impact caused by lockdown
Nicola Sturgeon said she was aware of the economic impact caused by lockdown

Both he and the First Minister warned the potential economic damage caused by lifting lockdown measures too early - only to see infection rates spike as a result - could be even worse than a managed release from current restrictions.

The path to recovery “remained uncertain” Gillespie said, with not all businesses able to reopen straight away due to changed consumer habits.

Opposition MSPs called for the Scottish Government to work with trade unions and industry to formulate an economic strategy for the challenges ahead.

Speaking at a daily media briefing in Edinburgh, Ms Sturgeon was asked if any amount of economic damage was worth the effort to save lives.

The First Minister said: “I think it is wrong, and potentially quite dangerous, to see this as a trade off between health and saving lives on the one hand, and protecting the economy on the other. 

“The only firm, solid basis for a sustained economic recovery is a population that is not facing the threat of a rampaging virus. 

“While we understand the deep damage of the lockdown measures on our economy, which is why it is important to protect as much of the productive capacity of the economy as possible, it is equally true to say that if we come out of lockdown early, and if that results in a resurgence of the virus,  and a necessity then to reimpose lockdown measures, the damage that will do to the economy is potentially even greater.”

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In his report, Mr Gillespie said: “Our analysis suggests that there could be a 33 per cent fall in GDP during the current period of social distancing,” the report said.

“This mirrors the findings from business surveys in March and is similar to the estimates from the OECD, OBR etc. on the scale of the impact on GDP.

“These figures are unprecedented in scale but so is the nature of this crisis and the policy response.

“Our analysis highlights the economic damage of a scenario where social distancing measures are lifted and then reintroduced, with the potential for a ‘W’ shaped recovery.

“As such, the path of the recovery remains uncertain for several reasons. Firstly, as business and society reopens we will see a reversal of the output contraction for many parts of the domestic economy.

“However, not all sectors will come back immediately as external demand, consumer tastes, and business models will have changed significantly. This will present challenges and opportunities for different segments of the business base reflecting their exposure to different economic channels - both external and domestic.”

Economy secretary Fiona Hyslop said: “Our response to COVID-19 is saving lives, but I am deeply aware that the pandemic is having an economic effect that is already being felt across Scotland.

“The Scottish Government is doing everything we can to support businesses at this very difficult time.

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“We want Scotland to recover as quickly as possible from this outbreak, and that includes rebuilding our economy as quickly as is safely possible.

“None of us should be under any illusions about the scale of economic recovery and, as we have said before, no government will have all of those answers.

“That is why we have set up an independent advisory group to provide expert economic advice and this will be crucial to help us deal with the challenge of rebuilding our economy.”

Responding to the report, Scottish Labour leader Richard Leonard said: “This report, alongside others including the report from the OBR published last week, makes clear both the impact to the Scottish economy so far, and the economic ramifications that the virus will have for many years to come.

“It is clear that a plan of action is required with regards to the future of our economy.

“The Scottish Government must work with trade unions and industry to put together an economic strategy that will help plan our way through and out of this economic crash. We cannot have another decade of austerity.”



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