Scottish economy faces ‘absolute crisis’ as jobless numbers grow

Scotland is facing an “absolute crisis and emergency” as the economic meltdown from the coronavirus pandemic starts to take effect, one of the UK’s most senior economists has told MSPs.

Professor David Blanchflower, a former member of the Bank of England’s influential monetary policy committee, warned that action is needed now to offset the worst impact, particularly on younger Scots.

It came as it emerged Scotland suffered an 11,000 rise in unemployment between April and June, meaning there are now 124,000 Scots out of work. But Holyrood’s economy committee heard yesterday the situation will be “incomparably worse” than the recession that followed the financial crash a decade ago.

“This is an absolute emergency, an absolute crisis and we should be trying to think about what we can do in the early part of September,” Prof Blanchflower said.

The Scottish economy faces a huge challenge to recover from the Covid-19 crisis. Picture: Andrew Milligan/PA Wire

“If we don’t do something about the young, we’re going to be in big trouble, but we don’t need to do lots of research for the answers. We know the answers, we need to do locally targeted things for the young and if we don’t the consequences are going to be enormous.

“The time to do something is now. Universities are probably the places that can help the most, but let’s go do something.”

The tens of thousands of overseas students, including many from China, who provide vital funding in fees for Scottish universities will not be there this term and Prof Blanchflower called for a radical approach to fill these places.

“Universities could do something distinct with no students coming, they potentially could step in here and we should take about this,” he said.

“Maybe we have to take every single person who applied to a Scottish University - forget about the grades - take everybody, just take everybody. This is going to need money, but the pay back and the rate of return will be huge.”

Prof Blanchflower added: “If you look at the last recession and thought that might have been bad, this is going to be incomparably worse.”

“I think we should the kitchen sink and everything we have at it.”

The number of people in work in Scotland fell by 15,000 between April and June as the impact of lockdown hit, according to the latest figures show.

The proportion of people aged 16 to 64 in employment north of the border fell over the quarter to 74.3% (2.651 million), data from the Office for National Statistics (ONS) indicates.

The unemployment rate rose over that period to 4.5 per cent with 124,000 people out of work. This was higher than the UK unemployment rate of 3.9 per cent.

The number of people aged over 16 in employment in Scotland fell by 15,000.

Business Minister Jamie Hepburn said: “For the period April to June 2020, Scotland’s employment rate estimate fell over the quarter to 74.3 per cent and the unemployment rate estimate rose over the quarter to 4.5 per cent.

“These statistics cover a full three months of lockdown measures before some businesses started to reopen but still do not reflect the full impact of the pandemic on the labour market as the job retention scheme is continuing to help support many people remain in employment.”

Scottish Secretary Alister Jack added: “The impact of coronavirus is again clearly seen in today’s figures and we can expect that to continue for some time. That’s why the UK government has guaranteed an additional £6.5 billion this year to spend on public services and support businesses in Scotland. We have also loaned more than £2.3bn to 65,000 Scottish businesses and supported almost 900,000 jobs in Scotland.”