Highlands, Islands and Moray economy faces £2.6bn body blow from coronavirus pandemic
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The Highlands and Islands and Moray have been disproportionally affected by the Covid-19, a new report has revealed, potentially costing the region's economy up to £2.6 billion.
The new report from Highlands and Islands Enterprise (HIE) also warned recovery could be slower for the north, with a return to pre-coronavirus levels unlikely before 2023 at the earliest.
Martin Johnson, HIE’s interim director of strategy and regional economy, commented: “As anticipated, the report shows the road to recovery is a long one. This underlines the need to collaborate and innovate, and to draw on the many strengths this region has.
“Natural assets such as the marine economy, for example, are expected to generate many new economic opportunities in relation to the green recovery and drive towards the net-zero targets. It’s crucial that businesses, communities, academic institutions and the public sector work together to make the most of these opportunities and rebuild our region’s economy.”
Looking ahead, even the most optimistic projection in the report indicates the region's economy will decline by £1.5 billion and contract by 11 per cent, against a eight per cent decline for Scotland as a whole.
In the worst case scenario, assuming a 19 per cent decline in the region's economy – five per cent greater than the Scottish Government prediction for Scotland in total, the loss would be as much as £2.6 billion.
Findings from the report included an increase in regional unemployment figures to 16,175 in July this year, more than doubling the unemployment rate to 5.7 per cent from just 2.4 per cent in July 2019.
Younger workers were particularly affected, with an increase in the unemployment rate for youth employment rising from 9.3 to 9.9 per cent.
Had the 73,000 employees placed on furlough over the summer been included in unemployment figures, the total under of unemployed would have risen to 31 per cent, the report states, two per cent higher than the Scottish average.
It also found that Highland region had one of the highest proportions of at risk jobs at 29 per cent, with 27 per cent of jobs at risk in Moray.
Although the HIE region has a higher than average number of self-employed workers, at 11 per cent of the Scottish total, with 18,300 claiming Self-Employment Income Support, take up was slightly lower than the national average – 74 per cent against 76 per cent nationally. However, the amount claimed per business was higher, £3033 in the HIE region and £2900 nationally.
With small and medium sized enterprises (SMEs) seen as at greater risk from the impact of Covid-19 than bigger organisations, the high proportion of micro-businesses also suggested a disproportionate effect on the north economy.
"This is compounded by the rurality and remoteness of areas in the Highlands and Islands, where bank finance is less accessible than urban areas," the report stated.
"With less capacity to access financial resources and increased risk to SMEs, job opportunities are likely to be significantly reduced. This increases the likelihood that young people will leave the Highlands and
Islands in search of job opportunities."
This in turn could see the challenges resulting from an ageing population exacerbated, the report continues.
The report revealed the worst affected sectors as accommodation and food services, which experienced a 70 per cent downturn, followed by arts, culture and recreation, down 37 per cent. Only real estate activities and public administration and defence showed minimal growth, with all other sectors in decline.
The report warns there is huge uncertainty as to what happens next and it is the most vulnerable who will be hardest hit.
"The Highlands and Islands is likely to take longer to recover than Scotland based on greater impacts to date, higher proportion of micro-businesses, higher proportion of self-employed especially across some of the hardest hit sectors and greater proportion of businesses in sectors likely to be slowest to recover," the report warns.
"Highlands and Islands regional recovery highly (is) likely to lag Scotland in the short-term (2020 and2021). Medium-term, the Highlands and Islands regional recovery potentially closer to FAI Central (Scotland) and Scottish Government Gradual recovery scenario, but recovery is still not likely till 2023, based on: ongoing disruption to overseas visitors and visitor spend; the composition of the Highlands and Islands and its dominance of localised service-based firms, where consumer confidence is likely to remain fragile longest; the dominance of small and micro-businesses."
However, given additional uncertainty around how long social distancing and other measures will be in place, and whether there will be a resurgence of the virus in future, the report authors say the analysis should be read with a degree of caution.
Mr Johnson said the report built on the information HIE had previously published on the ways in which Covid-19 has been affecting the region’s economy and would help inform its approach to supporting businesses and communities during the recovery.
