Will a ‘no deal’ Brexit wipe £11bn off Scotland’s economy in under a year?

Today the Scottish Government’s Chief Economist published analysis of the potential impact of a ‘no deal’ outcome on Scotland’s economy.

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One scenario presented projects that our economy could shrink by up to 7% (equivalent to around £11bn being wiped from our economy) in less than a year.

We’ve been asked by a number of people for our take, so we thought that it would be helpful to provide a quick summary here.

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February 21, 2019

Taxing contradictions: is Scotland the fairest taxed part of the UK?

Delivering his Draft Budget in December, Derek MacKay argued that Scotland was the ‘fairest taxed part of the UK’. As the dust settles on the 2019/20 Scottish Budget, it’s a good time to reflect on the Scottish Government’s approach to taxation, and to examine that claim.

Devolved tax policy in Scotland and the claim to fairness

Looking across each of the taxes controlled by Holyrood, the common thread underpinning policy decisions is the Scottish Government’s desire to make two claims.

First, that Scottish tax policy is more progressive than the equivalent policy in other parts of the UK. Second, that those with the lowest incomes, or living in the lowest value properties, pay relatively less tax in Scotland than they would do in rUK.Continue reading

Brexit uncertainty and the Scottish economy: Is winter coming?

Last week the Governor of the Bank of England warned that Brexit has created a “high level of uncertainty” and “companies are holding back on making big decisions”.

Earlier this month, the Bank cut its growth forecast to just 1.2% for 2019. If this turns out to be correct, this will be the slowest year of growth since the financial crisis.

Not all of this is down to Brexit.

Some of the revision reflects a weaker global economic outlook – with data out last week showing that Germany has just avoided entering recession by the narrowest of margins.

With the data pointing to a lowing UK economy, what is the latest data telling us about how well the Scottish economy is holding up?Continue reading

February 18, 2019

Scottish productivity statistics – latest update and longer-term trends

Last week, the Scottish Government published updated labour productivity figures up to the third quarter of 2018.

The release was also effectively the first official assessment of Scotland’s international productivity performance up to the end of 2017.

Recall that this was the measure used to assess the ‘Scotland Performs’ target of being in the top quartile of OECD countries for productivity. Recall too that, back in 2007, the Scottish Government’s Economic Strategy set a target to reach this top quartile by 2017.

Last week’s data confirms that this target has been missed. Scotland’s productivity remains around 20% below target.

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February 14, 2019

Scottish Exports: Growth in 2017 but target missed

Today the Scottish Government published Export Statistics Scotland, the key source of information on Scottish exports.

In light of the ongoing Brexit uncertainty and the potential risks to Scottish trade patterns, today’s publication offers some interesting insights into the different markets that Scotland sells to, the sectors that are doing well (and those less so) and Scotland’s export performance over the longer-term.

Headline numbers

International exports from Scotland rose by £1.9 billion – or 6.2% – between 2016 and 2017. Note that this is in nominal terms; in real terms the growth was just 0.5%.

Boosted by the competitive value of the pound and strong growth on the continent in 2017 – where the Euro Area economy grew at its fastest rate since 2007 – the improvement in Scottish exports was driven by a £1.7bn increase in exports to the EU. This was equivalent to a 13.3% rise between 2016 and 2017.

Scotland’s exports to the rest of the UK also increased in 2017, up £2.2 billion (4.6%).

The Scottish Government’s Economic Strategy had a target to grow Scottish international exports by 50% by 2017 (on a 2010 baseline). Despite today’s uplift, the figures confirm that this target has been missed, with international exports up by around 35% since 2010.Continue reading

January 30, 2019