Brexit ‘unecessary burden’ on Scots economy

There is a “high probability” that output and growth in the Scottish economy would be damaged if Britain left the EU, according to the latest economic report from the University of Strathyclyde’s Fraser of Allander Institute.

Any vote to leave the EU would “place an unnecessary burden” on Scottish companies and economic policy, the report said.

The likelihood is that “trading arrangements would be less favourable than in the EU” if the UK left the union.

“Not only would actual and potential Scottish exporters have to overcome their weaker competitive position due to lower labour and total factor productivity they would also have to face the additional hurdle of less favourable trading arrangements,” said the report.

“Secondly, Brexit might worsen Scottish productivity growth through the negative effects on trade competition, inward investment and financial integration.

“So, at a time when there is increasing policy concern about Scotland’s productivity and growth performance a vote to leave the EU would place an unnecessary burden on Scottish companies and economic policy.”

Meanwhile, Brian Ashcroft, Economics Editor, Fraser of Allander Institute, said output and jobs growth in the Scottish economy had weakened since the Institute last reported in March 2016.

He said the Scottish economy came “perilously close” to a recession in 2015 and despite a slight upturn, growth in the fourth quarter “may fail to avoid a recession in the coming months.”

The institute had revised down its GDP (output) forecast for Scotland this year to 1.4% from the 1.9% it forecast in March 2016.

“This downward revision is driven by slow investment growth, the continuing effects of the fall in the price of oil on household incomes and spending, a general slowing in household spending as the rate of household borrowing diminishes and a worsening demand for Scottish exports as global growth and growth in Scotland’s key export markets slows,” wrote Ashcroft.

“We are forecasting growth of 1.9% in 2017, a downward revision to our March forecast of 2.2%, due to an anticipated weakening of both domestic and export demand for goods and services produced in Scotland compared to our March forecast.

“We are now forecasting 2018 and our prediction is that there will be growth of 2.0% as the economy returns to trend.”

Read the full report here: