Published:

Brexit, FAI Publications, Scottish Economy

Today’s Commentary in 6 bullet points!

Today we published an update to our Economic Commentary in the light of the EU referendum outcome.

We hope that you like the new format.

This short blog summarises our key conclusions in six bullets.

  1. Over the past year, Scotland’s economic recovery has remained fragile. The impact of the EU referendum result is exactly what the Scottish economy did not need.

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  1. Following the decision by the UK electorate to vote to leave the European Union, prospects for 2016, 2017 and 2018 across the UK now look much more challenging and uncertain.

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  1. Reason 1: A pro-longed 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 growth.

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  1. Reason 2: There is a high probability that trade and investment will be damaged by the decision to become less integrated with the EU. As businesses and investors adjust their expectations to life outside the EU, we expect growth to be lower than it would otherwise have been.

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  1. On balance therefore, and in the absence of a significant fiscal policy stimulus by the UK Government, we forecast that Scottish growth will slow considerably through 2016, 2017 and 2018.

 

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  1. Growth is likely to be lower but remain positive on an annual basis. A short ‘technical recession’ within the next three years in Scotland – defined as two consecutive quarters of falling output – is however, highly possible.

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Authors

Head of Research at the Fraser of Allander Institute