Experts fear Scottish slowdown after Brexit

Economy: Country faces prolonged uncertainty and volatility

A sharp slowdown in Scottish economic growth as a result of Brexit has been predicted by a leading academic thinktank.

The Fraser of Allander Institute (FoA) has forecast growth of just 0.9% this year, 0.5% next year, and 0.7% in 2018.

It also warned that unemployment in Scotland would rise to 7% next year, and the costs of leaving the EU on Scotland’s economy are likely to be structural and long-lasting.

The FoA said the combination of the sharp fall in the pound and the monetary stimulus from the Bank of England would mean that Scotland is likely to avoid a sustained recession.

A short ‘technical recession’ – two consecutive quarters of falling output – is highly possible.

The Strathclyde University institute said a prolonged period of economic uncertainty and financial volatility as the terms of ‘exit’ are negotiated is now unavoidable.

There will be risks for investment, household incomes and jobs, and trade prospects will be damaged.

The risks should not be over-stated, however, as exiting the EU would be different from the financial crisis of 2008 and 2009, where the global effects of the crisis were much larger.

Scottish Finance Secretary Derek Mackay said: “This is another deeply concerning assessment of the consequences of the EU referendum result, and how it threatens to undermine the recent positive signs in Scotland’s economic outlook.”

He added: “This report stresses the need for the UK Government to move away from its austerity policies to minimise the short-term economic impact.”

He stressed Scotland remains open for business.