Scotland predicted to have worst recession since 1980, but not as bad as rest of UK

November 23, 2008

A study by the Ernst & Young Scottish ITEM Club has predicted that Scotland will enter the worst recession seen in the nation since 1980, but that the rest of the United Kingdom will fare worse.

Scottish GDP is expected to contract by 0.4% in 2009, compared to 1% for elsewhere in the UK. The report expects this to account for 50,000 job losses in Scotland, with the worst level of unemployment since the 1990s - a jump from 74,000 to 124,00 out of work, or 4.4%.

Dougie Adams, author of the report, warns that if the financial crisis is worst than anticipated there could be a contraction of 1%, making 60,000 jobs lost. Private services will fare worst, he says, with 20,000 jobs to go. Next will be manufacturing, with 11,000 jobs lost, and 7,000 more will go in construction.

"Scotland has accepted that a recession is now inevitable. The economy must face a future with a changed landscape for its previously buoyant banking sector," said Adams. "A number of factors hold the key behind recovery. These include policy actions at a global and UK level, including any fiscal measures announced in the pre-Budget report, and the fall in oil and commodity prices. The sharp decline in inflation that is in the pipeline will buoy disposable incomes and leaves an open door to further interest rate cuts. Finally, the UK will also benefit from the sharp fall in sterling that is unlikely to be frittered away by wage inflation. However, recovery critically depends on both the willingness of the banking system to extend credit and the readiness of businesses and consumers to use it."

In 2010, he predicts Scottish growth to recover by 1.5%, with the rest of the UK gaining only 1%. He expects this to balance out again in 2011.