KPMG: Scottish economic recovery could regain lost ground within two years
Scotland’s economy could completely regain lost ground within the next two years and outpace the UK-wide average, according to the latest economic forecasting from KPMG.
KPMG estimated the country’s economy took a 9.6% hit in 2020, broadly in-line with forecasts, as the pandemic impacted almost every sector.
Across the UK, there was a drop in GDP of 9.9%. But the latest best-case analysis from the firm suggests that a continuing successful vaccine rollout and a potential post-restrictions ‘consumer bounce’ could result in Scotland witnessing annual GDP growth in 2021 of up to 5.5%, compared to 4.6% UK-wide, and up to 5.8% in 2022, compared with 5.6% across the UK.
While the data offers some real hope and optimism for Scotland’s prospects of a post-Covid economic recovery, there remains concerns that unemployment may rise significantly towards the end of 2021, driven by the long-term effects of Brexit and the winding down of government support measures, including the furlough schemes.
For industries including hospitality and retail, any long-term return to growth could come too late. The latest data from the SRC-KPMG Retail Sales Monitor warns the sector witnessed only modest improvements in sales between January and February, with year-on-year takings down by more than 24%. Meanwhile, the Scottish Licensed Traders Association has cautioned that more than 10% of the workforce was likely to be lost in 2021, in Scotland’s bar, restaurant and licensed venue industry.
Catherine Burnet, KPMG’s regional chair in Scotland, said: “Our latest economic forecasting undoubtedly offers some optimism, but with a big slice of caution. While it’s reassuring to see that GDP could be completely back to pre-Covid levels of growth within two years, the figures don’t account for the many jobs and valued businesses that may be lost forever as the pandemic rumbles on.
“Last year we warned of a potential ‘two-speed’ recovery with some regions of Scotland suffering far harder than others. As the picture has become clearer, we’re finding that there’s less of a geographical division and more of a sector-by-sector imbalance. While the country’s already flourishing tech, biotech and medical industries have continued to grow and attract international investment, there’s no escaping from the devastation that Covid has created in hospitality, retail and travel and tourism.”
She added: “The Scottish Government’s roadmap out of restrictions, coupled with our latest economic modelling and the COP26 summit in Glasgow this November, offer real hope that we have an opportunity to build back and regain lost ground with a focus on a truly sustainable, green recovery, but to achieve this we’ll need business and political leaders to work more collaboratively than ever before on a strategy that ensures Scotland’s long term success.”