Unemployment would rise after no-deal Brexit, top economist warns

A no-deal Brexit would be a “sharp shock”, increase unemployment and could shrink the Scottish economy by 7%, Scotland’s top economist warned MSPs.

With just three weeks until the UK is due to leave the EU, the Scottish Government’s chief economic adviser said that they would not be able to mitigate all the damage caused by a no-deal Brexit.

Giving evidence about his report into the economic impact if the UK leaves without an agreement in place, Dr Gary Gillespie told MSPs the Scottish economy would be between 2.5% and 7% lower compared with remaining.

He said: “Despite the best government mitigation, a no-deal would impact a short, sharp shock to the economy.

“With that kind of shock, you would see it manifest in the labour market.

“You would see unemployment – from its record-low level at the moment – beginning to rise as firms respond to the challenge of reduced demand, supplies and cash flows.”

MSPs questioning the economist came away from the Europe Committee no clearer about what plans are in place for a no-deal Brexit.

After six questions by Tavish Scott, trying to elicit details about whether the government had a plan for no-deal Brexit and how it would respond, Dr Gillespie said it had not been made public but insisted there was one in place.

He stressed the complexity of response required across all government departments and businesses, saying: “There’s no published plan as of yet but there’s no published plan at the UK level either.”

“There’s a plan in place but the key thing about the plan is that the plan can’t mitigate across all the areas.”

Dr Gillespie added: “What we’ve heard from the UK is that the Bank of England will bring forward particular measures but we haven’t heard much else about what a plan would be.”

MSPs also questioned Dr Gillespie and the Scottish Government’s deputy director of economic analysis Simon Fuller about the impacts of Brexit on people coming to work in Scotland.

Highlighting the damage to tax revenues of reduced immigration, Mr Fuller said: “If you had a 50% fall in EU migration, Scotland’s economy would be about 6% smaller by 2040 than would otherwise be the case if migration continued at the levels we’ve seen over the last five to six years.

“That would mean GDP of £6 billion to £7 billion lower and feeding through to tax revenues of about £2 billion to £3 billion lower.”