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| 'High chance' of Scots recession | 'High chance' of Scots recession |
| (about 2 hours later) | |
| There is a "high probability" that the Scottish economy will go into recession next year, it has been warned. | There is a "high probability" that the Scottish economy will go into recession next year, it has been warned. |
| The Fraser of Allandar Institute said the effects would be worse in Scotland than in the rest of the UK. | The Fraser of Allandar Institute said the effects would be worse in Scotland than in the rest of the UK. |
| It said the impact on banking and financial services would be greater north of the border because of the scale of Scottish banks' losses. | It said the impact on banking and financial services would be greater north of the border because of the scale of Scottish banks' losses. |
| The institute's first full Scottish-focused economic forecast came as unemployment figures rose in Scotland. | The institute's first full Scottish-focused economic forecast came as unemployment figures rose in Scotland. |
| The Labour Force Survey, which gives quarterly statistics, revealed that 126,000 people - or 4.7% - were now out of work, an increase of 13,000 in three months. | The Labour Force Survey, which gives quarterly statistics, revealed that 126,000 people - or 4.7% - were now out of work, an increase of 13,000 in three months. |
| The Fraser of Allandar Institute predicts that more than 4,000 jobs will be lost in 2008 and more than 37,000 jobs will go next year, with net gains not forecast until 2011. | The Fraser of Allandar Institute predicts that more than 4,000 jobs will be lost in 2008 and more than 37,000 jobs will go next year, with net gains not forecast until 2011. |
| Unemployment would peak at 162,300 - or 6.1% - in 2010, it said. | Unemployment would peak at 162,300 - or 6.1% - in 2010, it said. |
| Many companies may not yet realise how quickly their trading position could worsen in the current climate Paul BrewerPricewaterhouseCoopers Dundee 'top for business growth' | |
| Its latest economic commentary, supported by PricewaterhouseCoopers, concluded that the impact of the global financial crisis on Scotland would depend on the scale of the deflation of the housing market and the effect on financial services. | Its latest economic commentary, supported by PricewaterhouseCoopers, concluded that the impact of the global financial crisis on Scotland would depend on the scale of the deflation of the housing market and the effect on financial services. |
| The institute argued that the fall in prices was likely to be lower in Scotland than the rest of the UK but that the impact on banking and financial services would be greater north of the border. | The institute argued that the fall in prices was likely to be lower in Scotland than the rest of the UK but that the impact on banking and financial services would be greater north of the border. |
| The report stated: "This is because the scale of the losses on sub-prime and impairments facing the two principal Scottish banks, RBS and HBOS, are considerable and exceptional compared to other UK banks. | The report stated: "This is because the scale of the losses on sub-prime and impairments facing the two principal Scottish banks, RBS and HBOS, are considerable and exceptional compared to other UK banks. |
| "The losses have pushed RBS and HBOS to the brink of bankruptcy. | "The losses have pushed RBS and HBOS to the brink of bankruptcy. |
| "This outcome underlines the extent to which the lending behaviour of the two banks had ceased to be underpinned by the traditional risk management practices that had led Scottish banking/bankers to be perceived as prudent and even 'canny'." | "This outcome underlines the extent to which the lending behaviour of the two banks had ceased to be underpinned by the traditional risk management practices that had led Scottish banking/bankers to be perceived as prudent and even 'canny'." |
| 'Exacerbated recession' | 'Exacerbated recession' |
| However, the institute said the scale of the downturn now facing Scotland would probably be less severe than the 1980-81 recession, because then the monetary and fiscal policy "accommodated and even exacerbated the recession". | However, the institute said the scale of the downturn now facing Scotland would probably be less severe than the 1980-81 recession, because then the monetary and fiscal policy "accommodated and even exacerbated the recession". |
| Alongside a central forecast predicting recession in 2009 and unemployment figures, the institute produced three alternative scenarios because of "heightened levels of uncertainty". | Alongside a central forecast predicting recession in 2009 and unemployment figures, the institute produced three alternative scenarios because of "heightened levels of uncertainty". |
| Paul Brewer, from PricewaterhouseCoopers, said: "The latest economic forecast points to a rapidly deteriorating situation for many sectors of the Scottish economy. | Paul Brewer, from PricewaterhouseCoopers, said: "The latest economic forecast points to a rapidly deteriorating situation for many sectors of the Scottish economy. |
| "Combined with a backdrop of impaired lending capacity on the part of our two major clearing banks, it indicates there are significantly heightened risks for business. | "Combined with a backdrop of impaired lending capacity on the part of our two major clearing banks, it indicates there are significantly heightened risks for business. |
| "Just as bankers, economic forecasters and governments underestimated the speed and severity of the financial crisis and how quickly it is has affected the wider economy, many companies may not yet realise how quickly their trading position could worsen in the current climate." | "Just as bankers, economic forecasters and governments underestimated the speed and severity of the financial crisis and how quickly it is has affected the wider economy, many companies may not yet realise how quickly their trading position could worsen in the current climate." |