Brexit impact taking effect
Scottish economy at risk of ‘technical recession’
The Fraser of Allander Institute has revised downwards its Scottish GDP growth forecast to just 0.9% (from 1.4%) this year, 0.5% (1.9%) next year and 0.7% (2%) in 2018.
A short “technical recession” – two consecutive quarters of falling output – within the next three years could result from the Brexit vote and a sustained fall in the value of the pound. Unemployment is expected to rise to 6.5% this year and 7% next year. It is currently 5.5%.
In a commentary on Europe, the Strathclyde university based institute says: “A prolonged period of economic uncertainty and financial volatility as the terms of ‘exit’ are negotiated is now unavoidable. This will carry risks for investment, household incomes and jobs.
“Moreover, trade and investment prospects will be damaged by the decision to leave the EU, according to the report. As businesses and investors adjust, the Fraser expects growth to slow.”
Professor Graeme Roy, director, said: “Following the referendum result we predict a significant slowing in the rate of growth in the Scottish economy.
“The combination of economic and policy uncertainty, coupled with the longer-term structural consequences for trade and investment from leaving the EU, make the outlook much more pessimistic than before.
“Given Scotland’s fragile economic performance over the past 18 months, the impact of the EU referendum result is exactly what the Scottish economy did not need.
“The top priority has to be retaining access to the single market which will help mitigate some of the most damaging effects on investment, trade, productivity and jobs.
“Whether or not this can be achieved without freedom of movement is highly uncertain.”