Economic Commentary - December 2020

A summary of the global, UK and Scottish economies using the latest economic data available. The commentary also pulls insights from Scottish Enterprise managed companies and draws out some implications for policy makers.

The methodology consisted of desk research.

Global - The global economy is bouncing back from the unprecedented recession in the first half of 2020, but the economic outlook remains subdued. UK - Recovery has slowed as Covid cases have accelerated and measures intended to slow its spread have been reintroduced. Economic output in the UK is now expected to be 11% lower this year and in Scotland GDP is still 9.4% below February’s level. Scotland - There was a sharp decline in private sector activity in Scotland in October following the introduction of new restrictions to tackle COVID-19, although the fall in activity was less severe than in the spring. The number of unemployed people in Scotland increased by 16,000 over the year to September and claimant count unemployment increased by around 102,000 people in the year to October.

The Scottish economy appears to be stabilising after experiencing an unprecedented shock from COVID-19. However, the recovery remains fragile, and will be challenging and gradual. Further future lockdown restrictions will increase recovery time and the benefits from vaccination may not be immediate. The end of the EU transition period will see new rules of trade between the UK and the EU and will also potentially have significant implications for the economy as it emerges from COVID-19.