State of the economy: September 2020

Scotland Summary

• Scotland’s GDP fell 19.4% in the second quarter of 2020, following a 2.5% fall in the first quarter, with sharp falls across the services, production and construction sectors.
• More recent data for July showed that GDP grew 6.8% in July, its third consecutive month of growth, and GDP is 10.7% below its pre-Covid level in February.

Business activity returned to growth in August.

• As lockdown restrictions have eased and the economy has gradually reopened, business activity has strengthened.
• The number of Scottish businesses currently trading picked up from 80% in June to 95% in August.
• The Scottish PMI survey for August reported expansion in private sector activity for the first time since February.
• Growth in business activity was broad based, but remained slightly stronger in the Manufacturing sector.

Labour market impacts from COVID are still emerging.

• In May to July 2020, Scotland’s employment rate rose slightly to 74.3% and the unemployment rate rose to 4.6%.
• However, the Job Retention Scheme has supported around 1 in 3 workers in Scotland and around 15% of the workforce was still on furlough leave in August.
• As the scheme winds down, employment is expected to fall and unemployment to rise.
• In August, the Claimant Count in Scotland (Jobseekers Allowance and some Universal Credit claimants) was 225,800, a rate of 8.0%. The number of claimants has broadly doubled since March, a rise of over 100,000 claimants.

GDP projected to strengthen in the second half of 2020.

• Scottish Government analysis projects GDP to grow in the second half of 2020 but to fall by 9.8% over the year as a whole and for unemployment to rise to 8.2% in Q4 2020.
• In the medium term, output is projected to recover gradually back to its pre-COVID level in 2023-24.