Brexit may hit Scots hardest, new study forewarns

THE UK economy will skirt recession in 2017 as it sustains a “short, sharp shock” from Brexit uncertainty, and Scotland could suffer more than the rest of the UK.

In the longer term the UK may have to adjust to a permanent reduction in the size of the economy, after the “nasty shock” of the Brexit vote, according to the Ernst & Young-sponsored Independent Treasury Economic Model (Item) Club.

A boost to the export market as a result of a weak pound will be the only silver lining but in spite of this there is a “significant deterioration” in growth outlook.

Its summer forecast predicts a four per cent fall in house prices in 2017 and a 0.2 per cent drop in employment. The Item Club called the International Labour Organisation (ILO) prediction of 7.9 per cent unemployment by the end of 2019 as “optimistic”.

And there are fears the impact on the Scottish economy could be even more severe.

Duncan Whitehead, E&Y lead for economic advisory in Scotland, said the economic aftershocks will be difficult to quantify north of the border.

“Scotland faces an additional layer of uncertainty due to the preference for EU membership expressed both by the electorate and the Scottish Government but also because of the entwined nature of devolved and reserved competencies between the Scottish and UK governments,” he said.

While the UK’s material relationship with the EU won’t change for two years after Article 50 is triggered, the forecasters said the vote would “clearly impact confidence and expectations”.