Brexit will lead to economic slowdown in long-term, MSPS told
A respected think-tank is standing by its forecast that Brexit will lead to an economic slowdown in the long run, despite the resilience of the UK economy in the months after the referendum.
Professor Graeme Roy, of the Fraser of Allander Institute, said there was “no way” the organisation would move away from its view that leaving the European Union (EU) will result in the UK economy being smaller than it would have been if it stayed in.
A report from the Strathclyde University institute looked at a series of potential post-Brexit scenarios.
It states the most optimistic model – similar to Norway’s relationship with the EU – would see Scottish GDP drop by 2% within 10 years, causing the loss of 30,000 jobs.
The most pessimistic model – based on a so-called “hard Brexit” outside the single market, based on World Trade Organisation rules – would see GDP 5% lower within a decade, with 80,000 fewer jobs in the economy.
Giving evidence at the Commons’ Scottish Affairs Committee, Prof Roy said: “They (economists) have got quite strong evidence that in the long run becoming less integrated with your major trading partners isn’t good for the long-term health of the economy because it has an impact on exports, imports, investment and also skilled migration.
“That, for Scotland, is absolutely crucial because we know that without the migration from the European Union over the last few years our working population would have declined.
“In the long run, if these effects were to happen, then the economy would be smaller than it otherwise would have been.”
He added: “Where there is more uncertainty is what happens in the short to medium-term to get there.
“That’s where there has been a lot of discussion in the last few months around what economists said might happen immediately after Brexit and the fact that the economy was expected by most – including ourselves – to slow down more quickly.
“It has been more resilient to that. That doesn’t take away from the long-term challenges that come through that.”
Prof Roy said a range of factors had resulted in a more resilient economy than had been forecast.
These included a stronger than expected economy at the start of last year, stimulus from the Bank of England and uncertainty over when the UK will leave the EU.
Conservative MP John Stevenson said economists had got it wrong.
“You appear to be making what I would call excuses,” he said.
Prof Roy replied: “There are two effects happening here, one is what is happening in the long-term, there is no way we would move away from what we think will happen in the long-term if you look at what the potential impacts of Brexit would be.
“What you are talking about is what happens in the short-term and we were quite clear at the time, both before the vote and after the vote, there is a high degree of uncertainty about what might happen to the economy in the short-term.”