SCOTLAND’S economy shrank by almost a fifth in the second quarter of the year as the coronavirus lockdown hammered businesses in all sectors.

Official Scottish Government figures showed gross domestic product fell 19.4 per cent in real terms between April and June.

UK-wide GDP contracted by 20.4% in the same quarter.

In Scotland, the construction sector contracted by 41.5%, the dominant services sector by 18.7%, and production by 15.7%.

The slump, on top of a 2.5% contraction in the first quarter of the year, means the Scottish economy is now 21.1% smaller than it was at this time in 2019.

The UK economy contraction for the year is 21.7%.

The Scottish Government said the biggest contributor to the fall in GDP in Q2 was the closure of large parts of the services sector, which accounts for three-quarters of the economy.

This includes business services and finance, government, transport, tourism, hospitality and retail.

Andrew McRae of the Federation of Small Businesses in Scotland said: “By forcing thousands of businesses to shut up shop, we slammed the handbrake on the Scottish economy.

"These unsurprising statistics show the extent of the slowdown.

“Those firms that did the right thing now need the support policymakers to see them through to the recovery. That likely means no new pressures on business and ongoing support for firms still facing trade restrictions.

“The last thing that Scottish firms need is another sea change in trading conditions. That’s why negotiators need to agree a small business-friendly EU UK trade deal quickly. Many operators simply don’t have the reserves to cope with another crisis.”

SNP Economy Secretary Fiona Hyslop called for Holyrood to have more powers over taxation, spending and borrowing to cope with the economic recovery from Covid.

She said: “The coronavirus (COVID-19) pandemic has had an extremely serious impact on the economy right across the UK and Scotland is no exception.

“We have worked hard to protect Scotland’s economy and ensure that as many people as possible keep their jobs and this is backed by a package of support to businesses that totals over £2.3 billion.

“Despite these efforts, the winding down of the UK Government’s furlough scheme will put even more jobs at risk - with over 217,000 people still furloughed in Scotland - and we remain disappointed the UK Government has declined to extend the Job Retention Scheme beyond October.

“It is now essential that the Scottish Parliament is granted the additional powers it needs to properly manage the response to the crisis as we move towards recovery.

“It is also the case that the last thing our businesses need is further economic turmoil as a result of a no-deal Brexit. That is why we have repeated our calls for the UK Government to agree an extension to the transition period.”

Tory Scottish Secretary Alister Jack said: “These figures continue to show the impact Coronavirus and lockdown has had on our economy.

“The UK Government was quick to put measures in place to shield people from the worst of the pandemic.

"More than 930,000 jobs in Scotland have been supported through the furlough and self-employment schemes, £2.3 billion loaned to Scottish businesses and £6.5 billion additional funding given to the Scottish Government.  

“As the economy re-opened in July, the UK Government has provided targeted support where it is needed the most with VAT cut for tourism, the hugely successful Eat Out to Help Out scheme for hospitality and comprehensive Plan for Jobs to create new opportunities right across the country.

“We are also doing everything we can to build back better our economy, including protecting the vital UK internal market which accounts for more than 60 per cent of Scottish exports.”