Stockpiling for Brexit to ‘hit Scots economy’
Businesses are likely to “stockpile” goods to prepare for Britain’s exit from the EU in a scenario that would deliver a post-brexit shock to the Scottish economy, the government has been warned.
Chief economist Dr Gary Gillespie says government officials must be prepared for migrant labour travelling to Scotland to dry up and for banks to stop lending money to Scottish firms.
A report says the “shock” cost to the UK economy in the six months before Brexit could be as much as £38 billion.
Scotland’s economy could be hit by a post-brexit shock as firms “stockpile” supplies to deal with an increasingly uncertain future outside the EU, the country’s chief economist has warned.
There are also concerns that banks may stop lending to Scottish firms who do most of their business in the EU, while investment may nosedive as global corporations see the UK as a “less attractive” option.
The vital flow of migrant labour to Scotland from the EU may also dry up as workers are discouraged from coming to the UK, according to the latest State of the Economy report published by the Scottish Government’s chief economist Dr Gary Gillespie.
The Scottish economy has remained buoyant in recent years despite the Brexit threat, as the North Sea oil and gas industry continues to bounce back. Growth in the second quarter of this year reached its highest level since 2014, today’s report says.
But “more volatility” is likely as EU exit looms amid growing concerns of a “no-deal” Brexit.
“It remains unclear the extent to which any UK agreement, if achieved, will enable an orderly transition,” Dr Gillespie warns in the report.
“Uncertainty relating to the form and timing of agreement for EU exit remains a key concern for many sectors of the economy and goods and services sectors will be impacted in different ways.”
A key concern is that businesses and consumers may “stockpile” goods in advance of the country’s EU exit next March to protect supply chains, amid growing fears that a “no-deal” Brexit could make this awkward.
Although it will result in an immediate “bounce” in the economy with a 0.4 per cent boost to overall GDP growth levels, this will be “more than offset” by a subsequent slowdown in the years following Brexit.
Today’s report sets out a possible £38 billion “shock” to the economy in the six months before Brexit across the UK, according to modelling from the Centre for Economic and Business Research (CEBR).
The proposed impact of Brexit could also see businesses delay hiring new staff, as well as making investment and purchases as the economic environment becomes more uncertain.
International investors may view the UK as a “less attractive” proposition, the report warns.
Critically for Scotland, the vital flow of EU migrants, who are deemed essential to keep the population growing and filling key roles in the NHS and social care, may be jeopardised. They may be discouraged from moving to, or may decide to leave, the UK.
And Scottish firms which do much of their business in the EU may struggle to access cash from banks, which will be reluctant to lend to them amid uncertainty over the future relationship with EU, which may undermine their business model.
A key fear is the climate of uncertainty may hit consumer spending levels. New analysis in the report indicates confidence among consumers has been weak since the EU referendum and remains
Raab provokes anger on both sides of house as he rules out changes to Brexit deal in final vote
negative. Today’s report notes Scottish GDP grew 0.5 per cent between April and June 2018, a marginal increase on the 0.4 per cent the previous quarter and above the rate of the UK as a whole at 0.4 per cent.
The improvement was attributed to strong export growth on the back of a weaker pound and the rising value of oil.
Scotland’s labour market has also performed well, with unemployment close to record lows. Independent forecasts of the Scottish economy suggest output growth in Scotland could strengthen over the next couple of years, however will remain below trend.
“With less than six months to go before the UK leaves the EU, Brexit remains the key downside risk to Scotland’s economic outlook,” the report adds.
The government has been accused of trying to “gag” parliament by insisting that a vote on any Brexit deal reached by Theresa May will see MPS forced to accept or reject a ‘clean’ motion on the agreement, before any amendments can be made.
Brexit Secretary Dominic Raab, summoned to the House of Commons to explain the procedure for a so-called ‘meaningful vote’, reiterated that approval by MPS would be on a ‘take it or leave it’ basis, with no ability to alter the terms of Brexit once a deal has been struck.
His comments prompted anger on both sides of the House, with Conservative MPS warning Mr Raab that the country would “never forgive” a breach of trust after the government had earlier promised parliamentarians a “mean-
Paris Gourtsoyannis
ingful” say. “Any amendment to the motion would not be able to effect amendments to the withdrawal agreement or the future framework, which will have been agreed at the international level between the United Kingdom and the European Union; nor could any such amendment delay or prevent our departure from the EU as set out under article 50,” Mr Raab told MPS.
Addressing the leading Remainer on the Conservative benches, the former Attorney General Dominic Grieve, Mr Raab acknowledged that his colleague “may wish to change the terms of the agreement that has been struck”.
The Brexit Secretary added: “I think that would come up against very real, practical and diplomatic obstacles.
“So late in the day, there would not be time to revisit the negotiation. Secondly, just from a practical, diplomatic point of view, is he really suggesting that at that point we would actually be offered different or more favourable terms?
“I think that that is unlikely in the extreme.”
In votes during the passage of the EU Withdrawal Bill, the government avoided defeat on the crucial Brexit legislation by promising MPS they would get a ‘meaningful vote’ that allowed the motion putting the deal before the Commons to be amended.
During exchanges yesterday, Mr Grieve told Mr Raab that the government’s plans for the Commons vote were “entirely unsatisfactory”, adding: “My right honourable friend knows that a lot in this House depends on trust... it tends to undermine trust in the government’s intention to honour the commitments they gave to the House.”
Fellow Conservative Remainer Anna Soubry said it was “quite incredible for the Secretary of State to stand up and basically say that, as a former minister who navigated the [Withdrawal Bill] through the House, they did not understand the consequences.”
Labour MP Luciana Berger said it was “clear from what the Secretary of State has just told us that the government are not offering the House a meaningful vote.
“How does it amount to Parliament taking back control if the government are now attempting to gag our democracy by preventing MPS from being able to amend the motion first?”