Brexit to wipe £8bn from Scotland’s GDP - Fraser of Allander Institute

The cost of Brexit to Scotland’s GDP over the next decade could be £8 billion and tens of thousands of jobs, according to economic authorities at the Fraser of Allander Institute at Strathclyde University’s business school.

The leading academic body has issued the warning in a report commissioned by the Scottish Parliament’s European and External Relations Committee looking at the possible economic implications for Scotland of the vote to leave the EU.

While studies to date have concentrated on the UK as a whole and tended to focus on the aggregate economic impact, with little assessment of the different impacts by sector, the new Fraser of Allander research has attempted to provide “an inter-regional and multi-sectoral analysis of Brexit on Scotland and the rest of the UK”.

The findings show that over the long term (i.e. 10+ years), most economists predict that the decision to leave the EU will have a negative impact on trade, labour mobility and investment north of the border based on the geographical pattern of Scottish international exports and the identifying of sectors most exposed to any changing trading relationship with the EU.

The data was crossed with an inter-regional macroeconomic model of Scotland and the rest of the UK to examine the long-term impact on the Scottish economy.

The institute found that under all modelled scenarios, Brexit is predicted to have a negative impact on Scotland’s economy, with a long-term reduced level of trade expected to result in Scottish GDP being between 2 per cent and 5 per cent lower than had EU membership been retained.

The institute said the range of impacts is driven by the nature of any post-Brexit relationship between the UK and the EU – the stronger the economic integration with the EU, the smaller the negative impact.

This would suggest that the so-called ‘Hard Brexit’ now being predicted is likely to result in the most severe impairments for the Scottish economy.

It was also identified that despite the significant impact on Scotland, this was still estimated to be smaller than for the UK as a whole.

The report said: “Our modelling suggests that ultimately, the size of the relative impact by sector depends on a complex interplay between the EU-export intensity of sectoral sales and how responsive particular sectors are to changes in competitiveness.

“We recommend that focus is now given to sectors that have close trading links with the EU – e.g. food & drink and some manufacturing sectors – to fully understand the particular issues facing them on a product-by-product basis. However, we also find that other sectors which at first glance may not be thought as immediately at risk from a change in the UK’s relationship with the EU – e.g. professional services – should also be considered. This analysis makes clear that Brexit is not going to be straightforward.”

SNP MSP Joan Mcalpine, head of Holyrood’s European committee, said: “This report paints a grim picture of Scotland’s economy ten years after Brexit.

“If the UK government leads us into a ‘hard Brexit’, the evidence presented in this report indicates that there could be disastrous consequences for jobs, exports and production.”

Last month First Minister Nicola Sturgeon warned the UK is facing a “lost decade” after Brexit, insisting that the likely economic impact has yet to be felt.