THERE'S a quiver in Michael Levack's voice as he describes the soul-destroying scenes befalling the Scottish construction sector. Over the past 18 months Levack, as chief executive of the Scottish Building Federation, has watched helplessly as his
industry slid from boom to bust. Sites once desperate for workers now lie eerily silent as the cold winter rain batters against half-finished buildings. The few labourers and site managers who have managed to avoid the recent job culls pore over their newspapers, praying for an economic miracle.
With work now drying up, Levack has had to resort to desperate measures in an attempt reinvigorate the sector and maintain the few positions that remain. He has been on an urgent public affairs campaign, pressing Scottish ministers to speed up public works projects such as the extension of the M74, to temporarily prop up the industry until the fog lifts on the economy.
"We just need work," he says. "We desperately need this work. We're not looking for handouts, we are just looking for work."
But Levack is not the only person banging at the door of Alex Salmond's Government. Nor is he the only lobbyist filling the budget airline and cheap train seats down to London to plead with Chancellor Alistair Darling and his Treasury advisers as they turn their minds to next week's pre-Budget report, which is shaping up to be a Government battle plan against the recession.
After official figures last week revealed UK unemployment hit an 11-year high of 1.82 million in the three months to September, employees in all sectors are beginning to realise that no one is safe.
Even companies that were previously described in the City as "boringly safe bets" are queuing up to announce jobs cuts as they review each corner of their strategy to see where every last penny can be squeezed. Last week the dubious honour fell on Ian Livingston, the new head of BT, who revealed he is to shed 10,000 jobs before March. In the same week, Virgin Media said it will be forced to slash 15% of its workforce, while Cable & Wireless, which now owns the Scottish telecoms company Thus, is losing 700 jobs across the UK. To round off a bad week, it was revealed on Thursday that Royal Bank of Scotland is making 3,000 redundancies worldwide although few of these are expected to be in Scotland.
The news from across the Atlantic was little better, with Sun Microsystems declaring an 18% cut in its global workforce, and Citigroup announcing a further 10,000 casualties at its operations around the world.
As if the slew of announcements weren't gloomy enough, the latest economic report from Strathclyde University's Fraser of Allander Institute, painted a grim picture for Scotland for the next two years. The report's author, Professor Brian Ashcroft, warned Scotland is likely to be hit hardest from the UK recession due to its heavy reliance on financial services.
In the "worst case scenario", Scotland will lose 116,600 jobs by 2010, Ashcroft said. In the best and most likely case, the jobs toll will hit 50,000 over the next 14 months.
But as doom and gloom dominates the headlines on a daily basis, the question preying on everyone's minds is what can employees up and down the country realistically expect over the next 18 months? How many more sectors will meet the grim reaper and when? And more importantly what, if anything, can the Chancellor and policymakers in Scotland do to avoid millions more joining the dole queue?
Although economists admit their forecasts are open to interpretation, Howard Archer, chief UK and European economist at Global Insight, offers little cause for optimism on the employment front. He points out there is a lag of six months to a year between slowing economic growth and higher unemployment figures, and the poor numbers being seen at the moment are mere ripples before the tsunami.
He points out that the most recent employment statistics reflect the economic situation in the first and second quarters of this year when growth had stagnated, but had not yet entered negative territory. With the next GDP figures released in January expected to reveal that Britain has now entered a technical recession, Archer warns that the unemployment toll will increase sharply. "It's just going to get worse," he says. "The labour market is a lagging indicator. You'll see the numbers get worse until well into the second half of next year." He expects unemployment in the UK could top three million.
Many economists admit they have been caught off guard by the depth and complexity of this recession, which they describe as a "white collar" recession that is likely to infect all sectors.
Dougie Adams, adviser to Ernst & Young's Scottish Item Club, says that unlike the recessions of the Eighties and Nineties, which affected manufacturing and heavy industry, we are now entering a historic service sector recession which will leave few jobs untouched. The job culls have already begun in financial services, property and construction, but in the new year there will be large lay-offs in everything from retail to the legal sector. He warns: "This recession will be slightly different in that we are a much more service-orientated economy. Services will become a large part of the job losses."
Adams, who releases his latest forecast for the Scottish economy this week, expects UK unemployment won't hit its peak before 2011. "We have a long way to go," he says.
Ashcroft agrees that this time round the middle classes will also be forced to queue at the JobCentres. Although the blue collar industries will be afflicted, the eye of the storm will hit professional services and consumer-facing sectors. "It'll impact right across the system. We should also expect quite a considerable shake-out in retailing and those sectors that serve tourism – restaurants for example."
As a result, universities across Scotland are expecting a surge in inquiries about higher education courses, as those who are unfortunate enough to be made redundant use the opportunity to pursue long-held ambitions to do a second degree or postgraduate course. "We see demand for university places and higher education places going up at times like this," says Ashcroft.
Economists also expect more people will emigrate to areas where demand for financial services, construction and skills such as legal expertise are still strong. Organisations such as the Scottish Building Federation report Scots have already started moving to the Middle East in pursuit of work.
At the same time, there is evidence that immigrants from countries such as Poland, which have propped up many of the UK's consumer industries over the past four years, are now returning home as the pound depreciates against their native currency, and jobs become more scarce. The latest statistics from the Home Office show the number of Eastern Europeans migrating to Scotland in the second quarter of this year recorded its biggest fall since the accession states joined the European Union in 2004.
But although this recession is likely to go down in the history books as a predominantly middle-class phenomenon, Ashcroft warns the lower paid jobs in sectors such as financial services will be the first to go as companies seek to cut back on spending. And he raises the prospect of a particular threat to a sector which employs 86,000, saying: "It's people in the back office and call centres who are going to get the chop here."
A survey to be released by the Customer Contact Association (CCA), which holds its annual convention in Edinburgh this week, will show one in four companies expect offshoring call centres to countries such as India to come "back on the agenda" this year. Anne Marie Forsyth, chief executive of the CCA, says that despite controversy three or four years ago, offshoring had become a "dead issue" among its members, who include Tesco, Vodafone, British Gas and Lloyds TSB. Now, she admits, it will be an obvious way in which large corporates will try to save money. She will this week urge companies not to skimp on their customer services at a time when it is more important than ever to keep hold of clients. "There is a temptation that they may try to cut costs here because it is a very big cost. But it's important to make sure customers don't suffer during times when they are already suffering enough through fear of the recession. You have to stop upselling to them and start meeting their needs."
With the glut of bad news piling up, the Chancellor is all too aware that his pre-Budget report on November 24 could make or break him as an economic messiah or pariah. Conscious that Labour will have to call the next General Election before June 2010, Darling will be desperate to avoid the unemployment bloodbath economists are predicting. But with the cupboard already half bare and public sector debt expected to reach levels not seen since the end of the Second World War, tax experts say his options are limited.
There have been calls for a reduction in VAT to encourage consumer spending and maintain the retail and hospitality sectors. But according to Bill Dodwell, head of tax policy at Deloitte, this could cost more than the Government can afford and may not achieve a great deal. "Cutting VAT from 17.5% to 15% which is the lowest level allowed by the European Union would cost £12.5bn and only works out at about £200 per person. Does it really change a lot?" he asks.
Instead, he recommends the Chancellor look at schemes used to lift the UK out of the last recession in the early Nineties – for example a tax loss carry back scheme where businesses could offset losses incurred this year against profits made in previous years, effectively gaining a tax rebate. He also suggests that deferring tax payments would provide a significant boost to small firms and may delay any immediate decisions to lay off staff. "Anything that helps keep people in employment is fundamentally a much better idea. Unemployment is doubly expensive as people no longer pay income tax and they get benefits," he says.
John Cairns, head of tax for BDO Stoy Hayward in Scotland, says the Chancellor could ease unemployment by reducing employers' National Insurance payments until the UK economy emerges from the storm. But he adds: "That would just be a flea bite on an elephant's backside. The Government needs to try and stimulate the economy generally to put cash into the system and confidence, which is nothing to do with tax. Darling is between a rock and a hard place. It's a very, very hard position to be in."
In Scotland, Salmond's Government has launched a six-point Scottish Economy Recovery Plan, which includes reforms to the planning system to speed up construction projects, and acceleration of investment in housing. But as the Fraser of Allander Institute points out, the future of the Scottish economy lies not with Holyrood, but with Scotland's banking executives. "It's not in the lap of the Gods, it's in the lap of the management of RBS and the merger of HBOS and Lloyds TSB," says Ashcroft.
The full article contains 1910 words and appears in Scotland On Sunday newspaper.
