Senior Scottish economists paint ‘bleak’ picture as ‘hard Brexit’ looms

Leading Scottish academics have warned that the UK government’s decision to pursue a “hard Brexit” in order to secure a limitation on immigration at the cost of access to the European single market has left Scotland and the UK’s future economic prospects “bleak”.

Jeremy Peat, visiting professor at the University of Strathclyde’s International Public Policy Institute, voiced his concerns as the value of sterling continued its plunge in value against numerous other currencies.

The pound hit 31-year lows against the dollar during every session between last Tuesday and Friday last week and the trend continued yesterday as it finished-up below $1.24, at around $1.2395 –down from Friday’s closing price of $1.2414 following an overnight ‘flash crash’.

Mr Peat said: “It is little wonder that sterling continues to fall when UK politicians are making it ever clearer that they are prepared to forego access to the single market in favour of a severe reduction in immigration. Lower sterling may provide some succour to exporters in the short term, but at the same time inflation will rise and disposable incomes will be adversely affected.”

He added: “Taking these impacts alongside the adverse shock to our economy anticipated when the UK undergoes a sharp exit, the economic outlook is bleak - and the scope for monetary and fiscal stimulus while retaining policy credibility is limited. A severe devaluation of sterling is not a solution to these anticipated ills.”

While the dramatic fall in sterling’s value has been cited as positive news for British exporters, Professor David Bell, professor of economics at the University of Stirling, echoed Mr Peat’s sentiments and said in the long-run its crashing value “makes us all poorer”.

He said: “The drivers certainly seem to be the reaction of the markets to the various things that have been said in the last few days around the nature of Brexit and, in particular, the likelihood that UK trade with the EU will be more costly than it has been.”

He added: “The cut in the value of sterling may actually offset these increased costs so we will continue to be able to export on reasonable terms to the rest of the EU. Of course, the reduction in the value of the pound makes us all poorer and that is the bottom line. That has been the effect of the revelations over the last few days and we will see that coming through over the next few months in higher prices.

“There will be increases in fuel prices, energy prices, food prices and so on. That is the way we will find we are poorer.”