Our understanding of the likely impact of the coronavirus pandemic on the Scottish economy continues to develop – slowly.

The latest official figures are scary. Office for National Statistics data show that after the first five months of this year the UK economy was 24.5 per cent - nigh on a quarter – smaller than it had been in February, despite a marginal bounce-back in May. We know from reliable survey data that the decline in economic activity in Scotland is thus far greater than any other UK nation or region; unsurprising given the different approach to easing lockdown. We also see from Tuesday’s report from the Office for Budget Responsibility that, in their "central" scenario, they do not expect UK economic output to regain its pre-virus peak until the end of 2022.

But we are all guessing and it is worth re-emphasising two clear major risks, which could make matters even worse than the "pretty bad" scenario set out by the OBR.

The first is that the pandemic will take much longer to dissipate than we at present anticipate and/or that we will have another spike.

Moving too slowly out of lockdown risks an even deeper recession and longer-lasting and higher levels of unemployment. Moving too fast may result in an earlier economic uplift, but at the risk of a second spike, necessitating another strict and extended lockdown, with horrendous consequences for business, employment and household incomes. It is difficult to envisage public finance of substance then being available to re-introduce measures like those relied upon in recent months. Consequently there would be even more business failures and a dramatic and extended increase in unemployment – with limited funds to support struggling households or enterprises.

The second risk is Brexit. With the ever-increasing prospect of a no-deal Brexit at the end of 2020 the outlook is dire. Agreeing on a later date for Brexit, and seeking a smooth exit, is critical for economic and social wellbeing. Somewhere there must be a wise counsel set to prevail. If not severe recession could continue in the UK through 2021 and indeed 2022.

Even if we dodge these risks we should expect only a gradual pick-up in activity through the second half of 2020 and into 2021. Like the OBR I see no ‘V’. Unemployment looks set to remain historically high and gross domestic product levels well below those pre-pandemic. The best we can wish for is an economy back on track by the end of 2022.

From the financial crisis we learn that severe austerity is not the solution. Further we need to identify clearly the priorities for environmental and social, as well as economic, objectives. Then the allocation of historically scarce resources, and complex new policy development, can be based upon solid and agreed foundations. Here lies another extreme challenge to policy-makers. How can we limit the extent of corporate failure and unemployment whilst also aiming at a more equal society meeting carbon-emission targets and other environmental challenges?

The pandemic and lockdown have allowed folk more time to reflect upon the state of society. Going forward there will be continuing demand for greater equity of opportunity and quality of life for many disadvantaged groups. Meeting these aspirations may prove as challenging as achieving macro-economic recovery. But we should use the forced economic pause to reset priorities.

There is one positive impact that we must hope for and seek out. Given a fair wind there will be more innovation, with a raft of new businesses evolving. Then productivity should start rising again after decades in the doldrums, bringing a boost to the rate of GDP growth, with positive impacts on employment and the public finances.

We have some further insight into policy-makers' priorities as a result of the UK Government’s mini-Budget and various pronouncements from Holyrood. The top priority must be to get business up and running across the board as soon as feasible – with associated positive effects on employment. Securing business recovery will unleash public and private sector resources to help support the unemployed and properly fund the NHS and an appropriate education system. Employment, health and education may be key objectives, but getting businesses up and running will be the key means to these and other ends.

As we have already seen many businesses have failed, and many more will fail in the months ahead. True, businesses in some sectors will face a rapid bounce-back in demand – with a period of above-normal sales to partially compensate for sales lost during the lockdown period. They will be the lucky few. Many others, including those in the tourism and hospitality sectors, will see a very slow pick-up, with no bonus bounce and full recovery delayed for some months – until the next peak season for their goods or services.

These less fortunate businesses will face immense challenges servicing the debt taken on in extremis and need extended and selective support. The temporary cut in VAT will be insufficient and may, as the IFS has suggested, be both starting and ending too early – and involve only limited "additionality". A plan must be hatched between Government, the banks and private investors, to ensure those businesses with genuine prospects of sustained viability, once "normal" business is resumed, are supported to survival. Substantial levels of debt will have to be written off; some rescheduled; and some converted to equity. Some businesses will be best allowed to fail. Selecting which businesses merit which (if any) form of continuing support will be time-consuming and require sympathetic but strong minds; and best take place at a local level.

Unemployment will be uncomfortably high so intervention was justified. But – as the OBR has observed – there will be substantial "deadweight" in the Job Retention Bonus, with the money going to support workers who would have been retained at any rate. Further, ending in February may again prove too early. The other labour market schemes are welcome but not sufficient.

Inevitably there are more interventions to come and more public funds required.

Complex choices will be required on the public finance front. HM Treasury must exhibit patience to return finances to good order at a manageable pace. But not everything can continue as was. Tough times mean tough choices. Some beloved subsidy arrangements will have to go. The affluent and wealth-holders will have to contribute – at least for a while – more than will be comfortable for them or for politicians. Stand by for increases in higher-rate income tax (at least at the UK level) and some form of wealth tax.

The key word looks to be "tough". All involved will face tough times and tough decisions if we are in the fullness of time to return to clear blue skies and smooth economic waters.