Independent forecasters have warned there is a “high” risk that Scotland’s economy will be damaged if the UK votes to leave the European Union.
The stark warning in an economic report published by independent forecasters came as a new poll showed that support for the Remain campaign has fallen by 13 percentage points in Scotland since April.
Although Scotland is still on course to record a majority vote for EU membership, the Ispos Mori poll for STV News showed Remain support had fallen from 66 per cent to 53 per cent.
In April, the Leave campaign was trailing on 29 per cent. Since then it has gone up to 32 per cent – suggesting there are still a large number of undecided voters in Scotland. On another day of intense debate over the UK’s place in the European Union, the report from the University of Strathclyde’s Fraser of Allander Institute found that the Scottish economy has weakened since it last reported in March 2016. The report said growth figures showed that Scotland came close to recession last year and has revised its GDP forecasts for the next two years downwards – prompting warnings that another recession could be on the horizon.
On the prospect of Britain quitting the EU, the report said there was a “high probability” that output and growth in the economy would be hit further by Brexit.
“First, the likelihood would be that trading arrangements would be less favourable than in the EU,” the report stated. “Not only would actual and potential Scottish exporters have to overcome a potentially weaker competitive position due to lower labour and total factor productivity, they may also have to face the additional hurdle of less favourable trading arrangements. Secondly, uncertainty attaching to a Brexit and the terms of any subsequent arrangements might worsen Scottish productivity growth through the negative effects on trade competition, inward investment and financial integration.”
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Brian Ashcroft, emeritus professor of economics at the University of Strathclyde, said: “The Scottish economy came within a hair’s breadth of recession last year and with little improvement recently may fail to avoid a recession in the coming months.
“At a time when there is increasing policy concern about Scotland’s productivity and growth performance, a vote to leave the EU would place an unnecessary burden on Scottish companies and economic policy.”
The warning came as UK government plans for an emergency budget to stave off a post-Brexit recession were effectively derailed by Tory backbenchers, who refused to support the £30 billion package of tax rises and spending cuts.
Chancellor George Osborne warned of a “black hole” in the nation’s finances if voters choose to leave the EU, requiring ring-fenced spending on the NHS to be slashed, along with budget cuts for education, defence and policing.
In the most potent economic message to date, the Chancellor suggested taxes would also have to rise, with the basic rate going up by 2p and the higher rate rising 3p. Inheritance tax would also have to rise, he said.
Prime Minister David Cameron warned Brexit would bring “consequences” for spending in Scotland under the Barnett Formula.
News of the Brexit budget measures outraged many on the right of the Conservative party, with 65 MPs signing a letter within hours pledging to block the budget and warning Mr Osborne his position could become “untenable”.
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Dozens of Tory MPs including Iain Duncan Smith, Liam Fox and Owen Paterson put their names to a statement threatening Mr Osborne’s position if he pressed ahead with cuts and tax rises break manifesto commitments made by the Tories a year ago.
“We find it incredible that the Chancellor could seriously be threatening to renege on so many manifesto pledges,” the statement read.
“It is absurd to say that if people vote to take back control from the EU that he would want to punish them in this way.”
The MPs added: “If he were to proceed with these proposals, the chancellor’s position would become untenable.”
With Labour leader Jeremy Corbyn also pledging to “oppose any post-Brexit austerity budget”, the row confirms the depth of political instability the UK faces if voters choose to leave the EU in a week’s time.
Speaking at the final Prime Minister’s Questions before the referendum, Mr Cameron said Scotland’s exporters would lose out if they were taken out of the European single market.