The Scottish Economy is growing at its fastest rate since the independence referendum in 2014 but remains at serious threat from a “disorderly” Brexit, according to new research.
The Fraser of Allander Institute’s latest Economic Commentary – ahead of tomorrow’s Scottish Budget – stated that the Scottish economy had performed strongly in 2018 but that the outlook for 2019 and beyond “is subject to unprecedented uncertainty and will hinge upon a series of crucial decisions taken in the UK Parliament over the next few weeks”.
It warned that leaving the EU without a ‘deal’ or transition period would represent a severe ‘negative’ economic shock. The latest forecasts, assuming there is a smooth transition, is for growth in Scotland of 1.4% in 2019, 1.5% in 2020 and 1.4% in 2021.
A disorderly Brexit remains the biggest threat to Scottish jobs and growth, warned the Institute.
It said that the Bank of England had set out a ‘worst-case’ scenario which could see the UK economy shrink by around 8% from 2019. This would be around double the size of the recession Scotland witnessed during the financial crisis and would be equivalent to an extra 100,000 people unemployed in Scotland.
“The Scottish economy has picked up after a challenging couple of years. In such uncertain times however, any assessment of the economic outlook must come with major health warnings,” said Graeme Roy, director of the Fraser Allander Institute.
“Whilst we don’t share the extremely negative view of some, we can say with some confidence that ‘no deal’ would be a substantial economic shock. Many businesses in Scotland are ill-prepared for such a disruptive change.”
He added that one of the most “frustrating things” with the Brexit debate is that it has crowded out important discussions around ongoing weak productivity performance, poverty and how to best respond to the challenges of an ageing population, climate change or automation.
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