1. State of the Scottish Economy Richard Murray Office of the Chief Economic Adviser 26 th March 2010

2. Synchronised Global Downturn

3. Output Remains Below Pre-Crisis Levels

4. Scotland Remains in Recession

5. Broad-Based Decline in Output

6. Scottish Unemployment Continues to Rise

7. Flexibility in UK Labour Market

8. Decline in UK Net Lending

9. Future Prospects

10. Scotland Close to Emerging from Recession

11. Modest Recovery Forecast for Scotland

12. Treasury’s Latest Forecasts

13. Risks Facing the Recovery  Withdrawal of fiscal stimulus measures  Fiscal consolidation  Further adjustment required in financial sector

14. Concluding Thoughts  Scotland close to emerging from recession  Unemployment continues to rise  Risks from the global economy & fiscal consolidation  Modest growth predicted in 2010

15. Impact of the recession on young people Susan Anton Lifelong Learning Analytical Services 27 March 2010

16. Claimant Count Unemployment 18-24 Year Olds

17. ILO Youth Unemployment 16-24 Year Olds

18. Scotland had highest percentage point increase over year in 16-24 ILO rate However, it still retains second lowest youth ILO rate in UK

19. Map indicates areas which have seen the largest increase in their share of additional unemployment since February 2008 for the 18-24 age group Central belt and the Borders seen the largest increase

20. Industrial breakdown of workers in Scotland Industry 16 to 21 year olds in FT Employment All Workers Difference Agriculture and Fishing2.8%2.1%0.8% Energy & Water3.2%3.0%0.2% Manufacturing11.3%10.0%1.3% Construction17.1%8.3%8.8% Distribution, Hotels & Restaurants28.4%18.9%9.6% Transport & Communication3.8%5.9%-2.0% Banking, Finance & Insurance etc12.5%14.3%-1.8% Public Administration, Education & Health14.0%31.8%-17.8% Other Services6.8%5.8%1.0% Source: Annual Population Survey (July 2008 to June 2009)

21. Impact of Economic Situation Education at a Glance 2009, published by the OECD says that across the 30 member countries, the economic crisis may - ‘increase the incentives for individuals to invest in Education, as worsening Labour Market prospects lower the opportunity costs of Education, such as earnings foregone whilst studying’ Source: EAG 2009 http://www.oecd.org/document/24/0,3343,en_2649_39263238_43586328_1_1 _1_1,00.html

22. Timing of the Statistics THE PAST – 2008/09 ACADEMIC YEAR What do the latest official statistics say? In 2008/09 there were an additional 3,240 Scots entering First Degree HE in Scotland (up 3% on 2007/08) to 101,905 The amount of total ‘activity’ in Scotland’s Colleges increased slightly (by 0.6 per cent) on the amount seen during the previous year 2008/09 Academic Year coincides with start of recession However given lead-in times to participate in HE and FE, the impact of the downturn will be more limited (See Chart 1)

23. Start of 2008/09 Academic Year (Similar to when the recession started) Source: Labour Force Survey (LFS) Start of 2009/10 Academic Year Chart 1: Scotland’s Official Unemployment Rate since 2007

24. Timing of the Statistics THE PRESENT – 2009/10 ACADEMIC YEAR What do the latest official statistics say? – We wont know for sure until January 2011! But we do know.. 2008/09 School Leavers in Scotland displayed markedly different behaviour from the previous year (See Chart 2). Staying-on rates in School also increased An extra 5.6% of Scots applied for and accepted a place to do HE in the United Kingdom in 2009/10 (the vast majority will be in Scotland) - UCAS

25. Chart 2: School Leaver Destinations, 2002/03 to 2008/09 Employment Higher Education Further Education 2009/10 Academic Year Source: School Leaver Destination Statistics 2008/09

26. Timing of the Statistics THE FUTURE – 2010/11 ACADEMIC YEAR Will depend in large part on how the economic and Labour Market situation continues to develop over the coming months. There is an expectation of greater numbers of people leaving School in the Summer UCAS suggest large increases in the number of people applying to do Higher Education. Their first release, in February 2009, reported a 31% increase in Scots applicants. When you remove those additional applications due to procedural changes, the increase is 21%. This is similar to the UK as a whole.