- The Scottish economy could face a 5.5% loss in output
- The British PM is still struggling to garner support
- There is no evidence policy makers will reach a compromise
There is a broad consensus that a No-Deal Brexit would most likely create a deep recession in the Scottish and British economy. However, there’s uncertainty about the duration, composition and potential scale of the potential disruption.
According to The BBC, researchers from The Fraser of Allander Institute (FAI) at the University of Strathclyde have predicted at least 5.5 percent loss in output from the economy, taking at least two whole years. FAI demonstrated several potential scenarios of the Brexit outcomes and the impact it would have on the economy with or without policy response.
Steadily Intensifying Preparations
In February 2019, Brexit Secretary Mike Russel warned of the likely scenario when it became apparent that Prime Minister Theresa May was struggling to garner support for her much-maligned withdrawal deal following rejection in the House of Commons. Russel said then the Scottish government was steadily intensifying its preparations for a No Deal. Russel warned then:
“A No-Deal Brexit has the potential to generate a significant economic shock which could tip the Scottish economy into recession – potentially into a deep recession – it would also have a severe impact on the labour market resulting in potential job losses, business relocations and closures, underemployment and a reduction in recruitment.”
The Scottish government established a Scottish Government Resilience Committee headed by the Deputy First Minister John Swinney that also included council chiefs and the Police of Scotland. According to research, there is fear of freight delays at Dover and via the channel, the tunnel could experience delays for goods coming into Scotland with rural areas being hit the hardest. According to Russel:
“Transport Scotland is also working with transport providers and ports and airports in Scotland to assess their existing capacity and identify how they could help mitigate disruption and ensure that Scotland’s exporters can continue to get their goods to market.”
An Increase in WTO Tariffs
Even though UK got an extension to Article 50 earlier this month to October 31, 2019, when the UK would leave the EU unless they agree in parliament sooner, the absence of a deal between the UK and the EU would cause an increase of World Trade Organization (WTO) tariffs on imports and exports, especially on foods and drinks and affect the common man.
Fraser of Allander Institute’s Graeme Roy said last week the delay in the deadline only postponed the problem with little or no evidence that policymakers in the UK are in a position to reach a compromise thereby meaning the risks to the economy remain high. Roy stated:
“Brexit should not be the only focus of attention. One consequence of the Brexit debate is that it has left little room for discussion of the emerging structural challenges and opportunities our economy is facing.”
