Brexit: Scotland’s chief economist issues stark warning about no-deal consequences

A no-deal Brexit would lead to a “major dislocation” to the Scottish economy, according to the country’s chief economist.

In a State of the Economy report published on Wednesday, Scotland’s chief economic adviser, Gary Gillespie, indicated that disruptions to logistics, supply, trade, investment, migration and market confidence could cause a “significant structural change in the economy”.

The analysis suggested that although the country had experienced a “positive year” economically, with growth in areas such as exports and high labour market performance, uncertainty around the UK’s withdrawal from the EU remained a “live risk”.

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The report highlighted business activity softening towards the end of 2018, with business confidence also becoming weaker - attributed to growing uncertainty over Brexit.

Derek Mackay echoed the warning. Pic - Andrew Cowan/Scottish Parliament
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It also pointed to forecasts that the Scottish economy is expected to grow by between 1% and 1.5% over 2019, although indicated that these would need to be reconsidered in the absence of an orderly departure from the EU.

The UK is expected to leave the EU on March 29, however Prime Minister Theresa May has not been able to gain sufficient support from MPs to support her deal.

Last month, MPs in Westminster voted against a proposal put forward by Labour’s Yvette Cooper to delay Brexit in order to prevent the UK leaving without a deal.

An amendment by Conservative MP Sir Graham Brady was backed by MPs however, with Theresa May urging colleagues to support it.

The amendment granted the Prime Minister a mandate to return to Brussels and re-open negotiations in order to secure a change to the Irish backstop.

The Scottish Government’s Economy Secretary, Derek Mackay said: “Scotland’s economy continues to perform well with further growth and record low unemployment.

“But we cannot ignore the fact that this is being put at risk by the increasing uncertainty associated with Brexit, and in particular the risk of a no-deal scenario.

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“Brexit, in whatever form, will cost jobs, make people poorer, damage our society and undermine the democratic decision of the people of Scotland to remain in the EU.

“It is vital that the UK Government takes immediate and urgent steps to rule out a no-deal Brexit, which threatens to have devastating consequences for our economy and extend the Article 50 process.

“Our first priority is staying in the EU, in line with the overwhelming vote in Scotland to remain, and we support another referendum on EU membership.

“Short of that, the least damaging option is to remain in the customs union and European single market of 500 million people, eight times larger than the UK market alone.”

Scottish Liberal Democrat leader Willie Rennie said: “The Scottish economy is fragile, with low growth and businesses and consumers worried about the future.

“Conservative neglect and Labour compliance has taken us to the brink of a no-deal Brexit which would devastate the Scottish economy.

“It’s clearer than ever that we need a People’s Vote and an exit from Brexit.”

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Scottish Labour leader Richard Leonard said: “This report shows the urgent need for Theresa May to take the threat of a no deal Brexit off the table, but also that our economy needs fundamental change.

“Productivity is critical yet the Scottish Government is nowhere near the targets it set itself.

“Labour will put power, wealth and opportunity back into the hands of people by boosting their wages and giving them more control in our economy, with an industrial strategy to drive growth.”