The Brexit vote is already turning skilled workers away from Scotland, with many firms also freezing investment plans amid growing uncertainty, business leaders have warned MSPs.
There are also fears that Edinburgh’s internationally renowned festivals will suffer as sponsorship deals and lucrative contributions from Trusts and Foundations are thrown into doubt by the decision to leave the EU.
The flagship hospitality, construction and professional services sectors - worth more than £30 billion annually to Scotland’s economy - are among the key areas at risk from the prospect of Scotland’s departure from the EU.
It comes as the Scottish Government’s Europe minister Alasdair Allan warned that the firms face a “damaging loss of business” if Scotland loses access to the EU single market.
Uncertainty over Brexit is already having a “significant” impact on Scotland’s economy, with the country’s future workforce and investment at a critical juncture, according to the Edinburgh Chamber of Commerce in a submission to Holyrood’s European committee. The MSPs are conducting an inquiry into the impact of Brexit on Scotland.
The hospitality industry, where some hotels or restaurants employ up to 50 per cent of their full-time staff from mainland Europe, is already feeling the effect.
“Any move to a points-based immigration system would have a major impact on the ability of this sector to recruit,” the submission states.
Many EU nationals have already quit the UK to return to their home countries as the falling value of the pound means “the UK is not as attractive an option as it once was”, with manufacturing firms hit badly.
“They report that the influx of Polish nationals which they have seen now seems to have stemmed,” Chambers chiefs add.
“Unanswered questions about the future appear to be putting skilled people off from coming to the UK, creating issues for sectors such as technology where there is a skills shortage.”
Business chiefs are now calling for a strong PR campaign to alleviate the uncertainty.
It adds: “In professional services there has been a slowing down of planning etc. affecting investment and longer term opportunity.”
The Edinburgh Festivals are widely seen as Scotland’s leading cultural assets and generate about £300 million a year for the national economy, attracting millions of tourists.
But bosses have warned of several “immediate effects” of Brexit as sterling plummets and stockmarket confidence falls.
This has meant “increased costs to artists and producers” of bringing international work to Edinburgh, a submission from Festivals Edinburgh states.
It also warns of “discussions with corporate sponsors taking longer to conclude, with a risk of lower sponsorship commitment than before given the drop in value of sterling assets and negative effects of business uncertainty on share values.
“Trusts and Foundations have also been “warning of lower funding available to distribute to beneficiaries for the same reasons.”
The submission adds “Some of Edinburgh’s Festivals have also reported increased caution among international partners in committing to medium and long term collaborations because of the uncertainty about the status of partners from Scotland and the UK, with examples of discussions not being entered into or failing to progress.”
The Confederation for Business and Industry (CBI) Scotland said firms are showing “resilience” in the aftermath of the Brexit vote, but firms are reassessing investment plans in Scotland.
It warns of a “serious deterioration in business sentiment” and a sharp fall in activity in July as a result of the uncertainty caused by the vote to leave.
It adds: “This uncertainty, combined with additional pressure on pension deficits from lower government bond yields, has led many – though by no means all – Scottish businesses to pause their investment plans.”
Construction chiefs also fear the impact of stricter immigration controls after Brexit, if they are unable to recruit skilled labour from the EU.
“This decision has left a great amount of uncertainty over the implications Brexit will have on the construction
industry and such a level of uncertainty does have a de-stabilising effect on construction activity,” it warns.
Dr Allan will today warn that opportunities for Scottish companies to maintain their £11.6 billion EU exports market will be jeopardised by Brexit as he visits Estonia today, ahead of the Baltic state assuming the EU Presidency next year.
“There is a real risk that Scottish companies face a damaging loss of business if the UK leaves the Single Market,” Dr Allan said.
“The priority is to protect Scotland’s interests at home and abroad.
“I’ll be meeting with Scots doing business in Estonia and reassuring them that we are exploring all possible options to protect Scotland’s relationship with the EU. Single Market membership is a key priority for Scotland with over 40% of our exports going to the EU.
“I’ll also reinforce that more than ever we need to tell our European friends that Scotland is open for business, working with our neighbours, and playing a positive role in the world.”