Coronavirus: Reports highlight impact on Scots economy

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The huge impact of the coronavirus crisis on the Scottish economy has been highlighted in separate reports.

An RBS survey indicated that private sector activity in Scotland fell at an “unparalleled” rate last month.

Its Purchasing Managers Index (PMI) recorded the biggest drop in new business on record.

Meanwhile, the Scottish Council for Development and Industry warned key sectors of the economy could be facing a “particularly difficult” future.

The PMI for April suggested services saw a quicker decline than manufacturing, although both sectors saw survey record falls in overall activity.

RBS said the coronavirus pandemic “continued to clatter the private sector economy”.

In April, the index plummeted to 10.7 from 29.7, reflecting a huge fall in output as about a quarter of business stopped trading, and many others cut back sharply. Of the nations and regions of the UK, only Northern Ireland recorded a lower figure, at 8.3.

Any figure below 50 suggests economic contraction.

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All the other index indicators were far out of the usual ranges, with firms reporting record cuts in new orders, capacity, and in backlogs of work and employment, although some included furloughed workers.

Looking ahead 12 months, Scots manufacturers registered a positive outlook.

However, including the much bigger services sector, Scottish firms were more pessimistic than most other nations and regions about their prospects.

‘Severe repercussions’

Malcolm Buchanan, chairman of Royal Bank of Scotland’s Scotland board, said: “The Covid-19 pandemic continued to cause severe repercussions for the Scottish economy in April, with latest data pointing to an unprecedented reduction in private sector activity.

“The Covid-19 induced downturn formed part of a wider UK trend in April, but Scotland fared worse than the UK as a whole, with the decline quicker than at the national level.

“Although there is some discussion of an exit plan from the current quarantine restrictions, it is unlikely that the economy will recover quickly from such a severe downturn.”

Meanwhile, a separate report has warned that key sectors of Scotland’s economy could be facing a “particularly difficult” future due to Covid-19.

‘Significant sectors’

A briefing paper produced by the Scottish Council for Development and Industry (SCDI) warned of the impact of the pandemic on areas including oil and gas, aviation, tourism and hospitality.

“These sectors are highly significant for Scottish GDP in terms of their contribution to employment, productivity and growth,” the paper said.

The economic development agency noted forecasts from both the Scottish government and the UK Office for Budget Responsibility that GDP could fall by about a third as a result of the virus outbreak.

While it said Scotland’s labour market was in “good health” prior to the virus, it said this had “changed radically in March and April”.

The SCDI noted that early indications suggested Scottish employers shed jobs at the fastest rate in over two decades in March, adding that this had happened at a faster rate than in UK-wide firms.

It said just over half (51%) of Scottish businesses had reduced staff numbers while 81% had cut staff working hours.

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