No-deal Brexit risks recession in Scotland, economic report warns

The Scottish economy could be pushed into recession if the UK leaves the EU without a deal, the country’s top economic adviser has indicated.

A Scottish Government report, published by Gary Gillespie, sets out the impact of two potential no-deal scenarios.

The first considers the impact of short-term disruption to supply chains over a number of months, and the second looks at an extended period of disruption.

Amongst the potential risks of a no-deal outcome, the report suggests Scotland’s Gross Domestic Product (GDP) could fall by up to 7%.

Trade with the EU is also expected to be “significantly impaired”, with a forecast for a potential drop in Scottish exports of between 10% and 20%.

A predicted fall in exports and overseas investment, coupled with a broader economic slowdown, is suggested to result in a 10%-30% depreciation in sterling.

Figures published on Tuesday by the Office for National Statistics (ONS) showed unemployment in Scotland had dropped to a record low of 3.5%, but the Scottish Government’s report states the jobless total could rise by as many as 100,000 people in the event of no-deal.

Economy Secretary Derek Mackay said the report confirms Brexit will harm Scotland’s economy and result in lower household incomes.

“People in Scotland voted overwhelmingly to stay in the EU but our interests are being ignored by a UK Government that wants to take Scotland out of the European single market, which is eight times the size of the UK alone,” he said.

“However, the economic harm of Brexit will be exacerbated if the UK Government decides to crash out of the EU without a deal. Such an outcome, which the Prime Minister refuses to rule out, represents a clear and present danger to Scotland’s economy.

Derek Mackay
Derek Mackay said the Scottish Government is continuing work to prepare for Brexit (Tom Eden/PA)

“There will be severe impacts for the economy, and for people and businesses across Scotland under a no-deal Brexit, and these impacts have the potential to push the Scottish economy into a deep recession, similar in scale to the financial crash of 2008.

“We will continue to call on the UK Government to immediately rule out the possibility of a no-deal Brexit and extend the Article 50 (withdrawal) process.

“As a responsible Government we are also continuing – and indeed intensifying – our work to prepare for all outcomes as best we can.

“However, whilst we will do everything we can to prepare, we will not be able to mitigate all of the impacts of the UK Government’s approach.”

Speaking at Prime Minister’s Questions on Wednesday, Scottish Secretary David Mundell accused the SNP of bringing a no-deal Brexit “closer to reality”.

He said: “I’m very clear about the implications of no-deal for Scotland and the UK and that’s why I want the Prime Minister to achieve a deal.

“There’s one sure and clear way to avoid a no-deal Brexit and that is to vote for the Prime Minister’s deal, but on every occasion that the SNP have had to do that, they have declined.

“And indeed what they have sought to do is to bring a no-deal Brexit closer to reality.”

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