Scotland could ‘completely regain’ Covid-19 lost ground within two years and outpace UK

The Scottish economy could completely regain ground lost during the Covid-19 pandemic within the next two years, according to a best-case scenario put forward today.

Analysis from KPMG also suggests that a continuing successful vaccine rollout and a potential post-restrictions “consumer bounce” could see Scotland’s recovery outpace that seen across the wider UK.

Scotland’s economy took an estimated 9.6 per cent hit in 2020 as the pandemic impacted almost every sector, compared to a UK-wide drop in GDP of 9.9 per cent. But KPMG said Scotland could see annual GDP growth in 2021 of up to 5.5 per cent, compared to 4.6 per cent UK-wide, and up to 5.8 per cent in 2022, compared with 5.6 per cent across the UK.

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However, although KPMG said the data offers some “real hope and optimism” for Scotland’s prospects of a post-Covid economic recovery, it cautioned that there are concerns that unemployment may rise significantly towards the end of 2021, driven by the long-term effects of Brexit and the winding down of government support measures, including the furlough schemes.

KPMG's Catherine Burnet said the forecast 'undoubtedly offers some optimism, but with a big slice of caution'. Picture: Mike Wilkinson.

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Catherine Burnet, KPMG’s regional chair in Scotland, said although it was reassuring to see that GDP could be back to pre-Covid levels of growth within two years, the figures don’t account for the many jobs and valued businesses that may be lost forever.

“Last year we warned of a potential ‘two-speed’ recovery with some regions of Scotland suffering far harder than others. As the picture has become clearer, we’re finding that there’s less of a geographical division and more of a sector-by-sector imbalance,” she said.

“While the country’s already-flourishing tech, biotech and medical industries have continued to grow and attract international investment, there’s no escaping from the devastation that Covid has created in hospitality, retail and travel and tourism.”

Ms Burnet said the Scottish government’s roadmap out of restrictions and the COP26 summit in Glasgow in November “offer real hope that we have an opportunity to build back and regain lost ground with a focus on a truly sustainable, green recovery – but to achieve this we’ll need business and political leaders to work more collaboratively than ever before on a strategy that ensures Scotland’s long-term success.”

Halting

A separate report out today has warned that one in five exporters has temporarily halted sales to European Union customers after new trading rules took effect at the start of this year.

One in ten exporters is considering stopping sales to Europe permanently, according to the Federation of Small Businesses survey.

The same proportion have established, or are considering establishing, a presence within an EU country to ease their exporting processes.

FSB national chairman Mike Cherry said: “At a moment when small firms are doing all we can to return to growth and get our economy firing on all cylinders again, those that do business internationally are being hit with some incredibly demanding, unfamiliar paperwork.

“Three months on from the end of the transition period, what we hoped would prove to be teething problems are in danger of becoming permanent, systemic ones. While larger firms have the resources and bandwidth to overcome them regardless, smaller traders are struggling, and considering whether exports are worth the effort any more.”

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