80,000 job losses to hit Scotland post-Brexit, warn economists

The Scottish Government is to be allowed to intervene in the Brexit court battle. Picture: Neil Hanna
The Scottish Government is to be allowed to intervene in the Brexit court battle. Picture: Neil Hanna
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Scotland is facing a “disastrous” post-Brexit economic slump with an £8 billion loss in GDP and tens of thousands of jobs disappearing over the next decade, senior economists have warned.

Scotland is facing a “disastrous” post-Brexit economic slump with an £8 billion loss in GDP and tens of thousands of jobs disappearing over the next decade, senior economists have warned.

Nicola Sturgeon listens as her Bexit Minister Michael Russell speaks during the Scottish Parliament debate on the triggering of Article 50 (Photo: PA)

Nicola Sturgeon listens as her Bexit Minister Michael Russell speaks during the Scottish Parliament debate on the triggering of Article 50 (Photo: PA)

Workers would also see their wages plunge dramatically under the “hard Brexit” scenario increasingly being hinted at by the UK government, according to Strathclyde University’s Fraser of Allander Institute report.

It warns growth would shrink by 5 per cent below expected levels if the UK was forced to revert to World Trade Organisation (WTO) rules outside the Brussels block. Wages would also fall £2,000 annually, with the number of people in work 80,000 below that expected if Scotland stays in the EU. Other, less extreme, scenarios would still see a dramatic impact on jobs and wages.

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Professor Graeme Roy, director of the Fraser of Allander Institute, said: “Under all modelled scenarios, Brexit is likely to have a significant negative impact on the Scottish economy.”

Brexit may make Scotland and the UK less attractive places to live and work, according to the research. SNP MSP Joan McAlpine, the head of Holyrood’s European committee which ordered the research, said: “This report paints a grim picture of Scotland’s economy ten years after Brexit.

“If the UK government leads us into a ‘hard Brexit’, the evidence presented in this report indicates that there could be disastrous consequences for jobs, exports and production.”

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The pound yesterday fell to its lowest level against the euro in five years as fears of a “hard Brexit”, which would see the UK outside the European single market, persist.

First Minister Nicola Sturgeon warned last month that the UK is facing a “lost decade” after Brexit, insisting that the likely economic impact has yet to be felt.

She has called for full access to the EU single market to be retained and warned that a second independence referendum, in order to maintain Scotland’s relations with the EU, is now being considered by the SNP government. Scots voted by 62 per cent to 38 per cent in favour of remaining in the EU in the June referendum, but votes south of the Border swung the result for Leave.

Today’s report, entitled Long-term Economic Implications of Brexit, is now calling for an urgent focus on the sectors of Scotland’s economy, such as food and drink, which have close trading links with the EU to identify measures to minimise the impact. But the effect on other key sectors, such a Scotland’s financial services, a key driver of economic growth, must also be looked at.

“Brexit is not going to be straightforward,” the report warns.

The impact on Scotland, though, is likely to be smaller than on the rest of the UK.

The economists examine three “Brexit” scenarios for the UK’s future relations with the EU. The least severe is a relationship similar to the one which Norway currently has, with membership of the European Economic Area (EEA) and full access to the single market. This would still result in the economy being 2 to 3 per cent lower than it would have been after ten years, or £3-5bn in cash terms. Wages would be £800 to £1,200 lower than expected with a loss of about 30,000 jobs.

A looser deal would be along the lines of the current Switzerland model which would see the UK outside the EEA, but part of the European Free Trade Agreement (EFTA), although access to the EU markets would be done through a series bilateral deals. There would still be free movement of people.

This would see a £4-6bn fall in gross domestic product (GDP), wages fall by £1200-1600, while employment falls by 30,000.

The hard Brexit approach would see economic relations with the EU based on WTO rules, with trade tariffs in place and trade in services restricted. There would be no freedom of movement for EU citizens wanting to work in the UK. It is this model which sees the job losses hit 80,000 and economic growth suffer a 5 per cent hit.

European committee deputy convenor Lewis Macdonald added: “Business and industry leaders and workers face an uncertain future according to this evidence. GDP, wages and employment are all predicted to fall regardless of the route the UK takes to leave the EU.”