Financial analysis by the Fraser of Allander Institute (FAI) has concluded if the UK leaves the European Union without an agreement it was cause “significant contraction” in the Scottish economy for the foreseeable future. The financial think tank examined several Brexit outcomes including the worst case scenario with no policy response, this will result in an overall economic downturn of -2.1 percent in 2019. The FAI also examined the impact even with Government intervention and it found there would still be huge economic implications for the people of Scotland.
With policy change to help manage the damage, the economy would still contract, this time by 1.9 percent, which would lead to -0.2 percent of growth in 2019, followed by -0.3 percent in 2020.
The Scottish economy would finally get out of the red and show signs of growth in 2021, when forecasts reveal it will rise by 1.3 percent.
The UK is now set to leave the EU on October 31 after Brussels granted Theresa May a six month extension to Article 50.
Professor Graeme Roy, director of the Fraser of Allander Institute says although this reduced the “imminent threat of a no-deal” the risk of damage to the Scottish economy “remain high”.
Meanwhile ahead of her visit to the STUC conference in Dundee on Wednesday afternoon, Nicola Sturgeon will warn the Scottish people of the damage caused by Brexit.
The First Minister of Scotland will say “any form of Brexit – no matter how soft – will have damaging consequences for people’s jobs, living standards and opportunities”.
Ms Sturgeon will add: “Those consequences can be partially mitigated – but they cannot be prevented, and no-one should pretend that they can.”
Meanwhile European Commission president Jean-Claude Juncker told MEPs the EU has “nothing to gain” from the disruption of a no deal Brexit.
Mr Juncker said: “We have adopted the necessary contingency measures and we are ready for a no-deal Brexit.
“But our union has nothing to gain from great disruption in the United Kingdom. The only ones who would benefit are those who resent multilateralism and seek to undermine the global legal order.”
However the FAI did forecast the Scottish economy could prosper if a deal was finally ratified in Westminster and the UK left the bloc with an agreement.
The central forecast, based on an orderly departure from the EU in 2019, predicts 1.1 percent growth this year, 1.4 percent in 2020 and 1.5 percent in 2021.
Whilst a fourth model envisages more business investment, perhaps through a deal being agreed, and forecasts further growth of 1.7 percent in 2019, 1.8 percent in 2020 and 1.6 percent in 2021.
Meanwhile Professor Roy warned of caution as Britain would still need to agree upon a future relationship with the EU which at this stage remains relatively unclear.
He added: “Moreover the nature of the UK’s withdrawal from the EU is but one step in the process – the negotiations on the terms of the UK’s future relationship with the EU have yet to begin in earnest.
“But Brexit should not be the only focus of attention. One consequence of the Brexit debate is that it has left little room for discussion of the emerging structural challenges and opportunities our economy is facing.”
