Business / Global accountancy firm predicts poor economic outlook for the isles
The SIC says new projects such as decommissioning and wind farm developments will drive recovery after Covid
SHETLAND is the Scottish local authority area that is to suffer the worst from the economic impact of the Covid-19 pandemic, according to KPMG, one of the world’s leading accountancy and financial services firms.
In the company’s latest regional outlook for Scotland, published on Tuesday, KPMG predicts that Shetland’s economy is to contract by 11.1 per cent in 2020 (Scotland: minus 9.1 per cent), and then to bounce back by as much as 9.2 per cent in 2021.
The economic recovery, however, depends largely on if and when a vaccine against Covid becomes widely available.
The auditors predict that should a vaccine be rolled out by April next year then Scotland’s economy would reach pre-Covid levels by early 2023.
As the government’s job retention scheme unwinds, KPMG also expects unemployment to rise to over nine per cent in the last quarter of 2020, and then to drop back to around 8.2 per cent in 2021.
KPMG’s analysis is based on gross value added (GVA) analysis by local authorities plus industry trends in each region.
Chief economist at KPMG UK Yael Selfin said sectors that are more labour-intensive were likely to be more severely impacted by the economic crisis, “meaning there will be a bigger effect on the labour market than the fall in GDP would imply”.
“The UK government has an important role to play. Not just in continuing to provide short-term support to the economy but in readying the UK for a more productive future, including upskilling a significant part of the workforce and upgrading the UK’s telecommunications network,” he said.
“If we get this right, we could come out of this crisis with a better economy.”
Catherine Burnet, KPMG’s regional chair in Scotland added: “Our latest revised forecasts for Scotland highlight the scale of uncertainty facing the country over the coming months.
“The next six months could provide the greatest challenge as the business community wrestles with both the ‘new normal’ of a post-Covid-19 world and a potential hard Brexit.”
Head of economic development at Shetland Islands Council Neil Grant said that in addition to Covid related issues the possible impact from a hard Brexit, poor digital connectivity and the isles’ limited economic diversity are all factors in the KPMG report.
“Economic activity is hugely important and new projects such as decommissioning projects, wind farm and electrical interconnector, new fish markets, the Shetland Space Centre, and a sizeable house build programme will all help Shetland’s recovery, and in the medium to longer term the islands deal, and energy transition projects,” he said.
“The government are now making available significant support mechanisms for reskilling and transition to both employers and individuals, and it is important that we continue to engage with these schemes to get the best for Shetland. “
Meanwhile, the Scottish Government has announced that it intends to establish a £2 million Green Recovery Programme for Scotland’s islands.
First minister Nicola Sturgeon said the initiative would open in October to help deliver on the government’s low carbon related commitments.
“This will include specific ring fenced funding for capital projects on islands relating to net zero and green recovery objectives, creating high quality, skilled, green jobs in some of our most remote and vulnerable communities,” the government said.
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