Brexit: Scotland suffers £3bn economic hit over political uncertainty

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Scotland's economy has already suffered a £3 billion hit as a result of Brexit as investment is choked off and growth slumps, a leading tank has found.

And there are warnings the country is facing one of the "hardest forms of Brexit" under the deal struck by Boris Johnson with EU leaders which will leave "considerable challenges" in the years ahead, according to the Fraser of Allander Institute.

An anti-Brexit campaigner stands opposite Parliament in London

An anti-Brexit campaigner stands opposite Parliament in London

Scotland's GDP has remained sluggish over the past year with firms putting off investment as they await the outcome of the negotiations over the UK’s exit from the EU, the think tank's latest Economic Commentary finds.

Read more: Recession fears as Scotland's economy falls into downturn
Mairi Spowage, Deputy Director of the Institute, said: “The recent Brexit uncertainty has clearly had a negative impact on the Scottish economy. Investment remains well below trend and as a result growth continues to be sluggish.

“We estimate that the Scottish economy is around 2%, or £3 billion, smaller than it otherwise would have been.

“Some of this hit to Scotland’s economy may be clawed back as businesses see a clearer path ahead. But nothing within this Brexit process can be taken for granted. And whilst a deal to leave may soon be agreed, the nature of the UK’s future relationship with the EU is far from certain.

Graeme Roy says Scotland is now facing a hard Brexit

Graeme Roy says Scotland is now facing a hard Brexit

"Debates over Scotland’s future constitutional status are likely to intensify.”

Read more: Scottish Parliament to reject consent for Boris Johnson's Brexit deal

Job loss predictions

The Institute has previously estimated that the Brexit could cost the Scottish economy anywhere between 30,000-80,000 jobs within ten years, with a slump in growth of 2-5%.

Professor Graeme Roy, Director of the Institute, said that leaving the EU with a deal could help lift some of the "fog of uncertainty" which has hung over the Scottish economy.

"By avoiding a ‘no deal’ outcome, and all that would entail, growth is likely to move ahead of previous forecasts," he said.

“However the nature of the ‘deal’, and in particular the intention to move to one of the ‘hardest’ forms of Brexit means that the long-term challenges for the Scottish and UK economies will be considerable."

It emerged last month that Scotland's economy has fallen into downturn after GDP shrunk by 0.3% between April and June, while unemployment has been steadily rising.

‘Wake-up call’

Dr Liz Cameron, Chief executive of Scottish Chambers of Commerce, said the latest figures must act as a " wake-up call" to Westminster.

"It is high time that the uncertainty caused by the vote to leave the EU three years ago was sorted once and for all," she said.

“It also underlines what we have been saying for years – there is an urgent need for political leaders to enable policies that will help us deliver sustainable economic growth and meet the fundamental challenges we all face in the future.”

A Scottish Government spokesman said any form of Brexit brings the "threat of further damage" to Scotland’s economy.

He added: "We are clear that a no deal outcome has the potential to tip the Scottish economy into recession.

“The Prime Minister’s deal would take Scotland out of the EU, out of the Single Market and out of the Customs Union, hitting jobs and living standards, and on top of that will now place us at a competitive disadvantage in relation to Northern Ireland.

“Scotland voted to remain and we should not be dragged out of the EU against our will with all the economic damage that will cause.”