New jobs blow as Scottish Widows axes 200

A total of 35,000 people lost their jobs between March and May this year, the equivalent of 380 jobs a day. It is the largest number for any quarter since figures were first recorded in 1992.

The UK rise in unemployment of 281,000 over the same period was also a record. It means 179,000 people are out of work in Scotland, the highest rate since April 2000, when 189,000 were officially unemployed.

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The Scotsman understands Scottish Widows staff will be told today that between 200 and 250 jobs are to be lost from the firm's operations in Edinburgh, Bristol and Leeds. The bad news will be delivered at two briefings this morning – one to be held in the Edinburgh International Conference Centre and the other in the city's Sheraton Hotel.

The majority of the cuts are expected to be in the marketing division, and they follow Diageo's announcement that 900 jobs were to go from its Kilmarnock and Port Dundas plants.

Earlier this month, Lloyds Banking Group announced 2,100 redundancies in the UK, and it was reported at the time that the 355 posts to be cut north of the Border were likely to be in the firm's wholesale and group operations division.

The Scottish Government was reluctant to comment on the latest job losses before they were officially announced.

But Scottish Conservatives finance spokesman Derek Brownlee said: "There is a huge human cost here and the speed with which unemployment is rising is frightening.

"Any job losses at this time will cause deep concern in the financial sector and in Edinburgh."

Scottish Widows, which employs about 4,000 people, was bought by Lloyds TSB in 2000 and is now part of Lloyds Banking Group. The group, which is 43 per cent owned by the taxpayer, admitted earlier this year that it might be forced to sell off core assets, with Scottish Widows – headed by Archie Kane, group executive director of insurance for the group – tipped as one of the most likely candidates for a sale. A spokesman for Scottish Widows refused to comment yesterday.

After the publication of the new unemployment figures, economists and business chiefs warned that worse was to come. A report commissioned by Scottish Enterprise said last week that Scotland would have 100,000 fewer jobs by the time the recession was over in two years.

The figures led to a fresh political row, with the Scottish Government accusing the UK government of "folly" over its plans to start cutting back on public spending next year.

Ministers at Westminster hit back, insisting they were doing everything they could to ensure those unemployed would be found a way back into the jobs market.

Scotland's financial and business community appears to be bearing the brunt of the cutbacks, shedding 29,000 jobs between December and March. Over the same period, the manufacturing sector lost 6,000 jobs.

Meanwhile, separate figures showed that in June the number claiming Jobseeker's Allowance climbed by 100 people a day. The number claiming the allowance in Scotland has nearly doubled since last year, to 128,100.

The data also shows that, while sectors such as manufacturing and financial services are being hit, the public sector remains relatively immune.

In Scotland, employment in the public sector increased by 2,000 to 858,000 in the first quarter of this year. Across the UK as a whole, public-sector employment grew by 285,000 over the three months to March, compared with a year earlier.

Both Scottish and UK ministers stressed yesterday that the employment rate north of the Border was still higher than the UK as a whole.

But the latest figures show that the rate of increase in unemployment in Scotland is one of the highest in the UK, suggesting that the employment rate north of the Border could soon fall to the level in the rest of the UK.

Business leaders said last night it was crucial that as unemployment got worse, Scotland clung on to its skilled workforce. The fear is that the country will lose so many workers that it will not be able to take advantage of an economic recovery when it comes. Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: "We expect the picture to get worse before it gets better.

"Businesses across many sectors are having to operate on extremely tight margins and, sadly, many have had to cut back on staff, losing highly-skilled individuals in the process."

She went on: "It is vital that we look to the future and plan to retain the skills within our economy that will help businesses to emerge from the recession in a stronger and more competitive position.

"Our colleges and universities have a key role to play here and must receive the investment they need to ensure that our skills base remains high."

Economists warned that, in the worst-case scenario, mass unemployment would lead to a vicious cycle of further job cuts.

Political economist John McLaren said: "People who aren't earning money aren't spending and earning taxes. That drives down demand, and more people become unemployed. You end up with a vicious cycle. That is why you need a stimulus package, so that it is the government which does the spending."

Ministers at Westminster insisted yesterday they were committed to that extra spending in this financial year and the next one to prop up the economy.

A spokesman for Scottish Secretary Jim Murphy said: "The Scottish budget is increasing by 700 million next year. That comes on top of 2 billion of tax cuts for Scotland this year, and 250m of capital spending, which is being accelerated from next year."

But Scottish ministers rejected those figures, claiming the Treasury was about to hit Scotland with a cut in public spending at exactly the wrong moment, cutting off its ability to reinvigorate demand. Across the UK as a whole, unemployment now stands at 2.38 million, the highest since 1995 and 750,000 more than this time last year.

The unemployment rate works out as 7.6 per cent of the economically active population. In Scotland, the comparable figure is better, at 6.7 per cent.

But the Liberal Democrats' Scottish spokesman, Alistair Carmichael, said the figures showed Scotland was losing jobs at a faster rate than the rest of the UK, so that advantage could soon disappear.