North economy would resurge if lockdown short, says Highland economist
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THE Highland economy has a good chance of recovery if the coronavirus lock-down does not last longer than three months, a leading economist has suggested.
Inverness-based Tony Mackay researched the impact of downturns and recessions amid the strict lock-down measures that have brought large swathes of the economy to a halt almost overnight.
His analysis underlines the importance of heeding government advice and remaining indoors which could see people able to return to work sooner rather than later – a move that could save part of the tourist season in the Highlands.
Mr Mackay said: “My research shows that historically if a recession or downturn lasts for less than three months then there is usually a good and even full recovery. The longer it goes on, however, the more permanent is the fall in economic output and employment.
“The main reasons for that are probably that most businesses and individuals can survive for three months on their savings or borrowing but the longer a recession goes on the more financial problems are created.
“In that context, the Chancellor’s policies to pay 80 per cent of wages or salaries and similar support for the self-employed will definitely benefit many people in the short run. However, the economic analysis shows that the longer a recession continues after about three months the more businesses will close permanently.
Tourism, hospitality and retail are clearly the most affected. There has been a huge fall in the number of visitors and many if not all hotels and visitor attractions have closed.
“On the positive side, we have a large public sector in Inverness and other parts of the Highlands, with bodies such as the Highland Council, HIE and SNH, and they have been little affected in terms of their finances.”
“If my three month theory is accurate then these policies will have a big impact in minimising the economic and financial problems. As I mentioned earlier, three months takes us to June so it would be great if local hotels and other businesses were able to re-open then.”
Mr Mackay’s view was supported by David Richardson of the Federation of Small Businesses who said that the more that can be made of the season.
“Tourism and hospitality are arguably the most vulnerable, though so are all in labour intensive, body-contact businesses, especially in the service sector,” he said.
“However, tourism and hospitality are also the region’s greatest strengths, based on our reputation for genuine quality – scenery, wide open spaces, peace and tranquillity, activities, natural and cultural heritage, and, of course, food and drink.
“There is every reason to believe that as the coronavirus crisis wanes, so people in the rest of the UK and world will become ever more desperate to escape their homes to enjoy all that we have to offer.”
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