Business leader demands National Insurance cut for firms as Scotland’s recession confirmed



The Scottish Chambers of Commerce has called for a cut to employers’ National Insurance contributions after official confirmation that Scotland has gone into recession.

GDP shrank for the second quarter in a row, down 2.5% in the first three months of the year and 19.7% in the second quarter, Scottish Government data shows.

While provisional monthly figures show some improvement in June, GDP “remains 17.6% below the level in February, prior to the lockdown measures which were introduced in March”.

The report estimates GDP increased by 5.7% in June compared with the previous month, noting there has been a “stronger and more widespread pick-up” in economic activity than in May, with output now said to be increasing “in all the main industry sectors”.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said said: “The collapse in Scotland’s GDP in the second quarter sets alarm bells ringing even if the fall was expected.

“The 19.7% decline from April to June makes Scotland’s and the UK’s economies among the worst performing in Europe.

“These figures confirm the Scottish economy is in deep recession and intervention is required now to prevent real and lasting damage to the jobs market.”

Cameron called on UK Chancellor Rishi Sunak to “make an immediate reduction in employers’ national insurance contributions”.

She added: “Without rapid intervention in the form of fiscal stimulus packages as well as cost cutting efforts such as rates holidays, we fear that the Scotland’s economic landscape may never recover to previous levels.”

While the new GDP figures are provisional, the report says: “When viewed across the four months of March to June, output remains 17.6% below the level in February, prior to lockdown measures which were introduced in March.

“The unprecedented nature of this drop in output can be contrasted to the financial crisis and recession in 2008 and 2009, where GDP decreased by around 4% over the course of 18 months.”

Services

In the largest part of Scotland’s economy, GDP was estimated to be up 4.3% in June, after growing 1.1% in May and falling 17.5% in April.

Construction

Output was estimated to have grown by more than a third (36.3%) in June, after an increase of 11.4% in May – however, performance in the sector did fall 49% in April.

Output for the construction sector remains 27.2% lower than it was in February, the report adds, although it said there is “particular uncertainty” about these figures “due to the absence of short-term regional data on output in the industry”.

Production

In the sector which includes manufacturing, output was estimated to have increased by 5.5% in June, having grown by 6.0% in May after a fall of 17.6% in April.

Economy Secretary Fiona Hyslop said the figures show “the devastating and unprecedented impact that the necessary lockdown restrictions have had on the economy”.

She repeated Scottish Government calls for the job retention scheme – in which more than 700,000 workers in Scotland have been furloughed – to be extended beyond October.



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