SCOTLAND faces an “incredibly challenging” economic outlook, a leading thinktank has warned, as new figures showed the jobless claimant count has doubled in 12 months.

The Fraser of Allander Institute said the impact of coronavirus also included a sharp fall in the number of hours worked in Scotland, down 6.7million over the last year.

Redundancies were now rising dramatically as job vacancies got scarcer, it added. 

The Institute also warned against putting too much faith in the relatively healthy employment rate, which include furloughed staff, as it masked the size of the problems ahead.

“Be in no doubt about the grim scale of the challenge currently facing many businesses and their employees,” it said.

The latest Labour Market statistics showed the unemployment rate in Scotland was 4.5% between June and August, the same as the previous quarter, and the same as the UK.

Although the same number, the UK rate was up from 4.1% on the previous quarter, taking it to its highest level in for three years.

The Office of National Statistics said UK redundancies rose ato the highest level since the financial crash of 2009.

Across the UK, the ONS estimated 1.5m people were unemployed last quarter, with redundancies at 227,000 following the mothballing of the economy during the lockdown.

In Scotland, the employment rate for 16 to 64 year olds was up 0.4 points on the previous quarter, but down 0.4 points over the year to 73.9%, below the UK rate of 75.6%.

The number of payrolled employees in Scotland in August was down 2.8% compared to the same month in 2019, worse than the 2.2% drop for the UK as a whole.

Perhaps most striking was the experimental claimant count, which includes Jobseeker’s Allowance claimants and those claiming Universal Credit principally for being unemployed.

The figure for September was 224,200 claimants in Scotland, up 112,800 or 101.2% since September 2019.

The unemployed claimant count was 8% in Scotland last month, but 7.6% for the whole UK.

Dr Stuart McIntyre, Head of Research at the Fraser of Allander, said: “While the various employment support schemes have softened the initial impact of Covid19 on the Scottish labour market, there is little doubt that the outlook is incredibly challenging.

“Headline measures like the employment rate at 73.9%, up slightly in the latest data, continue to mask the true scale of the challenge.

“Hours worked has fallen sharply, down 6.7m hours in Scotland compared to a year ago.

“The number of people in Scotland claiming unemployment related benefits is up over 100%, or by 113,000 people, compared to last year.

“We’re seeing redundancies across the UK rising sharply, up 49% over the past three months. At the same time vacancies are down over 40% on a year ago.

“The latest evidence from businesses is that many, perhaps most saliently at the moment in hospitality and tourism, are struggling to continue trading given the stop-start nature of our progress on the public health front.

“While unprecedented government support – including bounce-back loans and the furlough scheme – has helped many businesses to hang on over the summer, as this support tapers off many businesses are facing the hardest of decisions.

“In time, headline labour market measures will catch up and let us document the scale of the impact from CoVid19, but be in no doubt about the grim scale of the challenge currently facing many businesses and their employees.”

The Scottish Tories accused the SNP of lacking a plan to rebuild the Scottish economy. 

MSP Maurice Golden said: “Every part of the United Kingdom is suffering from the devastating economic effects of the Covid pandemic.

“However, under the SNP all too often our businesses have been side-lined and there’s a direct impact of that lack of engagement on Scottish jobs.

“Rishi Sunak has delivered an extra £700m for Scotland and the Scottish Conservatives have set out ambitious plans to protect jobs and involve businesses in decisions about new Covid restrictions. Where is the SNP’s plan to rebuild the Scottish economy?”

Scottish Labour leader Richard Leonard said the doubling of the claimant count in a year showed action was needed “to prevent families and communities falling into poverty”.

He said: “With thousands of Scots now off the payroll and the end of the furlough scheme looming, Scotland is bracing itself for a tidal wave of redundancies.

 “The economic shockwaves of this virus will rock the economy for some time to come. 

“It is of paramount importance that the Scottish and UK governments co-operate to protect the livelihoods of thousands of people and their families, and avoid the long-term scarring of unemployment.”

At the daily briefing, Nicola Sturgeon said the “renewed anxiety many of us feel about the virus and its health impacts is matched by the anxiety felt about jobs and incomes”.

The First Minister said: “These unemployment figures are of course concerning – but they are much lower than they would have been, without support for businesses from both the Scottish and UK Governments.

“The UK Government’s Job Retention Scheme has been especially important - and we still have concerns that the replacement scheme, which takes effect at the start of November is not comprehensive enough.

I”t may well lead to a significant rise in unemployment – including in jobs and sectors that, while they may struggle through Covid, would have a good long term future.

“The Scottish Government will continue to make that case to the UK Government. However we will also continue to provide our own support when we have the powers to do so.

“In total, we have provided more than £2.3 billion of support for business.

“Last week, we confirmed £40 million of support for those in the hospitality sector – and others - who are being hit by the current temporary restrictions.

“We are currently establishing with business our new Young Person’s Guarantee to ensure employment, education or training opportunities for all young people.

“And we launched a new transition training fund last week. It will make training available for up to 10,000 people over the age of 25, who have lost their jobs - or are at risk of redundancy - as a result of Covid-19.

“We will do all we can to protect jobs and businesses. But we must remember that the most important thing we can do for the long term good of the economy is keep the virus from running out of control.

“This can’t be seen as a contest between health and the economy.” 

Scottish Secretary Alister Jack said the unemployment figures were a concern, and warned of “further challenges to come”.

He said: “The UK Government is doing everything possible to protect jobs and livelihoods in the face of the global pandemic. We are supporting nearly half a million jobs in Scotland through our furlough and self-employed schemes and have committed a further £9bn to help employers keep workers on.

“We are also investing billions in those looking for work, including our £2bn Kickstart scheme for young people and doubling the number of work coaches.

“On top of extensive direct UK Government support to people and businesses across Scotland, we are also providing the devolved administration in Scotland with an additional £7.2 bn to help them get through the pandemic.”