In its latest Economic Commentary, the Institute said that the virus outbreak represents an ‘unprecedented shock’ to the global economy that will trigger a recession, but that the collective efforts of business and policymakers is to ensure that this is – as much as possible – a ‘v-shaped’ recession, with activity picking-up once the public health crisis passes.

Professor Graeme Roy, director of the Fraser of Allander Institute, said: “The large-scale mothballing of our economy in response to the public health emergency is unlike anything we have seen since World War II.

“Businesses and policymakers always knew that a global pandemic represented a major risk to our highly integrated global economy. But the pace at which this crisis has escalated has caught many off-guard.

“Assuming that the public health emergency will pass in the coming months, the hope of many is that that the economy should come out the other side with only a limited hit to its long-term productive capacity.

“But this is looking increasingly overly optimistic. The scale of the shutdown in our economy is so large it will take months, if not years, to recover, Key now will be ensuring that long-term scarring effects of any recession can be mitigated as much as possible.

“The economy that emerges from this, from the shops on our high street through to day-to-day working practices, is likely to look quite different.”

Mairi Spowage, deputy director of the Institute, added: “Whilst there remain issues to be worked through, including how some of the government support schemes will operate in practice, so far the policy response has been well received. But things are clearly escalating quickly and changing day-by-day.

“The current situation – almost unthinkable just a few weeks ago – of the State stepping in to support wages will not only help families and businesses at this crucial time, but will act as an important bridge to support the recovery when it comes.

“As with all previous recessions, some individuals, businesses and local communities will be impacted more than others. Of particular concern – at list initially – were businesses relying upon so-called ‘social spending’, such as tourism businesses, cafes, restaurants and retail. These sectors will look very different in the future.

“The tourism – and wider entertainment – sector is vital for Scotland, particularly at this time of year. Around 13% of the Scottish economy and 19% of employment is made up of such sectors, including retail, hotels and restaurants.

“But with the much wider shutdown in our economy roll-out in recent days, all sectors of our economy are going to be impacted in a major way.”

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