A no-deal Brexit would result in a “multi-million-pound blow” to the Scottish economy as the country’s network of global trade deals collapse, business leaders have warned.
Agreements with an estimated 70 countries in place as a result of EU membership would cease in a no-deal scenario and mean tariffs are applied on 29 March when the UK leaves the EU, according to CBI Scotland.
The warning came after Scottish secretary David Mundell yesterday indicated he was ready to back a move to remove control of the Brexit process from the government and return it to the Commons to avoid a “no-deal” scenario.
The Prime Minister’s EU withdrawal deal has already been rejected overwhelmingly by the Commons over concerns about the Northern Irish backstop. She is now seeking clarifications to this with EU leaders before bringing it back to the Commons, but with just weeks until exit day, the prospect of no-deal appears increasingly likely.
Scotland’s finance secretary Derek Mackay told MSPs yesterday the Scottish economy faced being tipped into a recession “worse than the 2008 financial crash” under a no-deal Brexit. And CBI Scotland director Tracy Black spelled out the impact of leaving without a deal for exporters.
“Overnight businesses in Scotland could cease to enjoy the benefits of tariff-free trade with, and easy access to, crucial markets for products and services from Canada to South Korea,” she said.
“Many firms are unaware that it’s not just their relationships with EU customers at risk from a no-deal Brexit, but relationships across the globe.
“Individual businesses trading with markets outside the EU would face tariffs worth millions being slapped on them instantaneously. These trade deals span five continents and are vital for the smooth export of our goods and services.
“The risk to these deals is an overlooked danger to our economy and yet another reason why no-deal is not an option for the UK and jeopardises jobs in our communities.”
In Scotland, exports to countries with EU free trade agreements are worth nearly £3.9 billion every year, accounting for almost 14 per cent of the nation’s exports. This figure equates to the annual salaries of 114,000 teachers.
Through these agreements, Scotland exports goods worth £790 million to Norway and £690m to South Korea each year, with the machinery and transport, beverages and tobacco, and mineral fuels sectors among the most exposed.
The warning follows a forecasts showing the Scottish economy could be pushed into recession if the UK leaves the EU without a deal. Scotland’s top economic adviser Gary Gillespie set out the impact of short-term disruption to supply chains over a number of months, and an extended period of disruption, in a report yesterday.
Mr Mundell appealed for the Commons to get behind Mrs May’s agreement to avoid a no-deal. The Scottish secretary was identified as one of four Cabinet ministers who have told the Prime Minister she must extend Article 50 if no-deal looms or he will back a proposal by Labour MP Yvette Cooper allowing parliament to take control.
“I don’t comment on private conversations I’ve had with the Prime Minister,” he said.
“What I have said to her repeatedly is that a no-deal outcome is a very bad outcome for Scotland and the United Kingdom and that we must do everything that we can to avoid that outcome.
“There’s a very, very simple way to avoid that outcome and that is for MPs in all parties to put the interests of Scotland first and vote for a deal, rather than raising the likelihood of a no-deal Brexit. I will do everything I can and whatever I deem necessary to avoid a do-deal Brexit coming about.”