Derek Mackay: No-deal could ‘wipe out’ two years of Scottish growth

Scotland could see two years of economic growth “wiped out” in a “disastrous” recession after a looming no-deal Brexit, Scotland’s finance secretary Derek Mackay has warned.

Every day sounds “new warning bells”, the cabinet secretary says in a stark intervention in today’s Scotsman, with the threat to jobs, businesses and the economy becoming “more pronounced”.

Business leaders last night backed Mr Mackay’s concerns, with a warning that thousands of Scots firms are not ready for a “chaotic” no-deal scenario.

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Investment is already drying up, with business and consumer confidence plummeting. Mr Mackay says it would be impossible to offset the worst impacts. “I must be honest that not every impact of Brexit can be mitigated,” Mr Mackay states.

Derek Mackay has issued a stark warning about the impact of a no-deal Brexit. John Devlin

The prospect of no deal appeared to heighten yesterday as Luxembourg prime minister Xavier Bettel launched a scathing attack on the approach of Mr Johnson’s government to Brexit talks, warning he may not agree to a deal with no proposals on the table.

The Tory leader says he is working “flat out” to reach a deal with EU leaders, but has insisted he is prepared to leave with no deal on the 31 October scheduled exit date and ruled out seeking an extension in line with recent laws passed in Parliament.

Mr Mackay says: “The ongoing uncertainty of a looming no-deal Brexit poses a huge threat to jobs, businesses and our economy and I fear these impacts are becoming more pronounced. It’s a situation which, at this point in the Brexit negotiations, puts our economy in jeopardy.”

He added: “The economic implications of leaving the EU with no deal will be disastrous for Scotland and could push the country into recession.”

Mr Mackay points to analysis by the Fraser of Allander Institute, which stated that no deal could equate to GDP in Scotland being £9 billion lower and unemployment rising to nearly double the current rate.

“That level of contraction would more than wipe out the last two years’ growth in the economy and the gains in employment,” the cabinet secretary said.

“We are already seeing the impact Brexit and the threat of no deal is having on business and consumer confidence in Scotland with an increase in stockpiling and reduced investment intentions. Every day brings new warning bells.”

His comments were echoed by business leaders who spelled out the looming calamity of leaving the EU without an agreement.

Andrew McRae, FSB’s Scotland policy chair, said: “Thousands of Scottish businesses aren’t ready for a no-deal, no-transition Brexit, and for a share of these businesses there are simply too many variables to adequately prepare.

“While firms need to do what they can to minimise their risks, decision makers need to do everything in their power to avoid a chaotic no-deal outcome.” Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “Trade with the EU is absolutely necessary to businesses in Scotland. It is our largest trading partner outside the UK.

“Businesses here need as friction-free access to markets as is possible when it comes to tariff and non-tariff barriers. Under WTO tariffs, some exports to the EU will become uncompetitive overnight.”

Scotland has enjoyed solid economic growth in recent years, although it has lagged behind the rest of the UK. But there were ominous signs for the labour market last week when officials figures revealed the country suffered a massive 19,000 rise in unemployment, while the figures fell elsewhere across the UK.

The Fraser of Allander Institute warned last week that no deal would see unemployment rise to nearly double the existing rate, increasing the number of unemployed by 94,000.