Scottish jobless to rise by 88% this year

Independent think tank the Centre for Economics and Business Research (CEBR) said the Scottish unemployment rate would rise from 5.7% to 8.4% in 2009, overtaking the 6.2% to 8% increase expected in the UK as a whole.

"It is a very bleak forecast," admitted Jorg Radeke, an economist with the CEBR, who compiled the figures for Scotland on Sunday. "We expect the Scottish economy to contract by 2.6% and that is caused by the turmoil in the financial markets."

He added: "The lack of lending will have a severe impact on the economy. Companies are not able to invest through this lack of funding.

"The level of investment is going to decline by 15% and that's going to have implications for companies closing down and more people becoming unemployed. There are going to be implications for every sector of the economy."

The figures provide yet more evidence that the country is plunging towards the most severe economic contraction since 1931.

The forecast has been made using the International Labour Organisation (ILO) definition of unemployment, which counts jobless people who are actively seeking employment as opposed to claimant count, which looks at those claiming benefit.

Economists and business leaders agreed that the future was looking increasingly gloomy. "That (jobless figure] is quite possible," said David Bell, an economist at Stirling University. "The lack of credit is squeezing what would otherwise be quite viable businesses.

"I also think that it is down to the problems in the financial services, the retail industry and construction. It is looking very bleak, and I am bound to say that it is very difficult to put a positive spin on it."

Iain McMillan, the director of CBI Scotland, said: "In terms of the broad order of their magnitude, the figures are credible in the current climate."

Efficiencies are built into businesses over time to maintain a steady employment. Normally it requires economic growth of 2.25% a year to maintain employment in the private sector and the reason for that is that the private sector is becoming ever more efficient.

When economic growth drops below that, unemployment starts to rise unless it is mopped up by the public sector.

"There is a lot of gloom out there," McMillan said. "If the economy contracts by so much, it is going to be dramatic for those people who lose their jobs and for the businesses that can't get credit.

"But there is still a lot of business out there and there will still be vacancies. But people looking for jobs are going to find it tougher with more competition for fewer jobs available."

A spokesman for John Swinney, the Finance Secretary, said: "Scotland is facing the same challenges on unemployment as the rest of the UK, but despite the difficult economic conditions, we have higher employment, a significantly lower unemployment rate, and higher economic activity levels than the UK average. The Scottish Government has put in place a recovery plan to mitigate the worst effects of the slowdown."

Meanwhile, Westminster ministers are preparing to tighten the immigration rules to try to ensure that firms take on jobless British people rather than skilled foreign workers during the recession.

Home Secretary Jacqui Smith was reported to be taking action to ensure that British workers get "first crack of the whip" when skilled jobs become vacant.