Brexit deal would be 'considerable challenge' for Scottish economy

By Douglas Fraser
Business and economy editor, Scotland

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image copyrightUK Parliament
image captionBoris Johnson has insisted he wants the UK to leave the EU on 31 October

Boris Johnson's Brexit deal would bring "considerable challenges" for the Scottish and UK economies, according to the Fraser of Allander Institute.

Its regular update on the state of the Scottish economy calculates that there has already been a £3bn hit to output.

Total output per year is currently running 2% below what had been predicted before Brexit negotiations.

The UK government said Mr Johnson had "secured a deal which works for the whole of the UK".

The Fraser of Allander report points out that the UK leaving the EU cannot be the only explanation for that under-performance.

It also estimates that the impact of a no-deal Brexit, with some measures taken to offset the worst of the damage, would still mean a decline in output next year.

The Allander team's central forecast for the economy, without a no-deal Brexit, is for 1% growth this year - below its long-term trend rate of growth.

So far this year, there was strong growth of 0.6% in the first three months, much of that due to stockpiling ahead of the initial date for Brexit on 29 March.

image copyrightPA
image captionTotal output per year is currently running 2% below previous predictions

The following three months, including a rundown of the stockpiles, saw output contract by 0.3%.

The central forecast goes on to see a rise in the growth rate to 1.2% next year, and 1.3% in 2021.

A more positive outcome would be seen if postponed business investment is unleashed following the emergence of a clearer picture about the nature of Brexit.

The Strathclyde University economic report suggests that there is some evidence that fears of no deal have reduced - partly because preparations have increased.

There has also been more clarity about the responses from the UK government, in boosting public spending, and the Bank of England.

It concludes: "Whilst some of the more apocalyptic predictions we have seen are wide of the mark, a no-deal exit would still be a major negative economic shock.

"It seems at least highly probable that Scotland [would] enter recession at some point in 2020.

"Aside from Brexit the lack of discussion about Scotland's economic performance remains a surprising gap in the policy debate, particularly given the tax implications that now face Holyrood. The one exception has been climate change."

A UK government spokeswoman said: "The prime minister has secured a deal which works for the whole of the UK, and at the same time we are stepping up preparations to ensure we are ready to leave by 31 October.

"We are working closely with the Scottish government to support them to get ready for Brexit, including investing nearly £160m to fund their preparations."