The latest UK Powerhouse report reveals Edinburgh is expected to see the second smallest economic contraction of all UK cities by the third quarter of this year with an annual fall in economic output of 7%.

Thanks to a large financial services sector, Edinburgh’s economy has not been impacted as much as other Scottish cities. Most financial businesses have been able to maintain services, with employees working from home, allowing the sector to emerge lockdown relatively unscathed.

While good news in the short term, the forecast for the year ahead projects Edinburgh will be one of the five slowest growing cities in terms of output together with Manchester, Leeds and London.

All the Scottish Powerhouse cities, including Aberdeen and Glasgow are forecast to be in the bottom ten in terms of annual GVA performance by the end of the fourth quarter of next year.

In terms of employment prospects in 2021, Aberdeen is expected to be in the top 20, with 6.5% year on year growth. Edinburgh and Glasgow are lower down the list on 5.9% and 5.8% growth respectively; but by way of contrast, London is bottom of the employment list, on -5.4%.

Of the top five UK cities to have used the furlough scheme this year, Glasgow is in second place, with 34% by share of the working population up to 31 July.

Mark Higgins, partner and head of the Irwin Mitchell Glasgow Office, said: “The report shows that a modern city economy has been key to surviving coronavirus. In England, cities with service sector economies, like Milton Keynes and Reading survived in much the same way Edinburgh has and are projected to enjoy a similarly strong recovery next year.

“Given that Edinburgh’s economy contracted the least, it’s not surprising it has less to gain next year. Aberdeen is projected to see good growth in employment, and with Edinburgh and Glasgow posting modest gains too, this is good news - but with a sting in the tail.”

He added: “Glasgow was one of the principal cities to make use of furlough this year and the scheme has undoubtedly saved jobs in the short term. The scheme’s extension saved more but whether a vaccine comes in time to secure those jobs and deliver a recovery substantial enough to sustain growth in terms of both economic output and employment next year remains to be seen.

“The UK economy grew by 15.5% in the third quarter of this year, but only on the back of a record 19.8% contraction in the previous quarter. With the unknown of Brexit still on the horizon, next year still promises a bumpy economic ride in Scotland and the government will need to take steps to ensure that any fragile recovery has the support it needs to avoid a wider crisis.”