Today the Scottish Government’s Chief Economist published analysis of the potential impact of a ‘no deal’ outcome on Scotland’s economy.
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.
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
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.
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
David Comerford, Chancellor’s Fellow, Fraser of Allander Institute, Department of Economics, University of Strathclyde
Sevi Rodriguez Mora, Professor of Economics, University of Edinburgh; CEPR Research Fellow
First published on VoxEU.org at: https://voxeu.org/article/gains-economic-integration-eu
Summary
Populists in Europe are contesting the perceived benefits of economic integration between countries. This column uses data on trade frictions to estimate the long-run impact of trade frictions on GDP if countries in Europe were to be more or less integrated. Negative between-country impacts, such as from Brexit or an EU collapse, imply a GDP reduction of between 1-3%. The potential trade benefits of a ‘United States of Europe’, on the other hand, may be an order of magnitude greater for its members.
Over the course of this week, the UK Government, the Scottish Government and the Bank of England all published new Brexit analysis.
We have been asked by a number of people to give our take on these numbers.
So in this blog, we attempt to summarise what each model is telling us and the implications for Scotland.
In short, the numbers don’t look great. Far from it.
Even under the UK Government’s favoured deal, the UK economy is expected to be smaller in the long run by around 4%.
But it is the Bank of England’s scenario of a disorderly ‘no deal’ Brexit that is the most eye-watering. Here the UK economy could shrink by 8% in a year – double the size of Scotland’s recession during the financial crisis. Unemployment could rise to 7.5%. If that was replicated in Scotland this would be equivalent to around an additional 100,000 people out of work.Continue reading
