Scotland's economy shrank by a fifth at start of lockdown

Scotland's GDP contracted by 19.4 per cent between April and June, compared to a 20.4 per cent drop across the UK.

A temporary closure notice in the window of the Cath Kidston store on Edinburgh's Princes Street in April 
A temporary closure notice in the window of the Cath Kidston store on Edinburgh's Princes Street in April  Credit: PA

Scotland's economy shrank by nearly a fifth during the first three months of lockdown, according to official figures published as it emerged that a higher proportion of workers north of the Border are still furloughed.

The country's GDP contracted by 19.4 per cent between April and June, compared to a 20.4 per cent drop across the UK, on top of the 2.5 per cent it shrank during the first quarter of the year.

All industries were hit by lockdown being imposed at the end of March, the figures showed, with construction showing the largest fall at 41.5 per cent.

The distribution, hotels and catering sector sustained the next largest amount of damage, with the sector shrinking by a third (33.9 per cent).

The figures were published as Rishi Sunak came under growing pressure to continue to support struggling sectors following the end of the furlough scheme, which has supported 930,000 jobs in Scotland.

A Scottish Government paper estimated around 15 per cent of Scottish employees were still furloughed in the second half of August, compared to 11 per cent across the UK as a whole.

Nicola Sturgeon has unlocked the economy more slowly than Boris Johnson in England and the paper claimed that extending furlough for another eight months could save 61,000 jobs at a cost of £850 million.

It argued that an extension to the end of June 2021 could "pay for itself" through wider economic benefits by avoiding a rise in unemployment in Scotland.

Celebrity chef Nick Nairn said lockdown left his restaurants on "life support" and warned he will have to make some "pretty tough decisions" if the Chancellor does not extend the furlough scheme beyond next month.

He said he hoped Christmas "will save us this year" but warned Ms Sturgeon limiting gatherings to six people from two households would be a further challenge.

Business leaders said Ms Sturgeon could also boost the economy by encouraging people to return to offices, move they said would boost productivity and output.

Tracy Black, the CBI Scotland director, said: "The fall in GDP reveals the sheer scale of the hit to the Scottish economy caused by lockdown.

"While we all knew that leisure, tourism and retail bore the brunt of the initial wave, these figures not only show how swift and severe the impact has been but also that no sector was left unscathed  – with vital industries like health and education, along with the rest of our all-important services sector, hit particularly hard."

MCC Accountants, which represents 150 small and medium-sized enterprises (SMEs), said many of these companies were struggling  to provide the IT infrastructure to keep employees working at home.

Andrew Morrison, the firm's director, said: "If these companies can show they can operate safely and their employees agree, they should be getting on with returning to the office."

Speaking at her daily briefing, Ms Sturgeon said the furlough scheme was still supporting more than 200,000 jobs in Scotland and she was "hopeful" the Chancellor would approve further support beyond next month.

Iain Stewart, a Scotland Office Minister said the scheme has "done its job" and businesses will still benefit from other forms of support.

He told BBC Radio Scotland: "The Chancellor yesterday said he was going to be looking at much more tailored and creative interventions to support those parts of the economy that will still need it."