Scotland stands to lose 5% growth and 80,000 jobs
In the worst but most probable scenario, Scotland will lose 80,000 jobs over a decade as a result of Brexit, a Fraser Allander Institute study suggests.
The study was published on Thursday. Interestingly, it suggests Scotland is less reliant on links with the EU than other countries and regions of the U.K.
The Fraser Allander Institute, affiliated with the University Strathclyde in Glasgow, is considering the leading economic policy think-tank in Scotland. The Institute has compiled scenario-based forecasts, although these are based on macroeconomic modeling rather than a foresight exercise that would entail consultation with market players.
Still, this is the most detailed scenario to date.
Worst and Best case scenarios
The projected cost of this worst case scenario corresponds to a loss of 2-to-5% of GDP growth. The scenario is based on the now dominant “hard-Brexit” scenario, which implies Britain will lose membership of the Single European Market and will retain access to World Trade Organization (WTO) rules.
The average worker would lose approximately €2300 a year and €5,7bn pounds in losses.
That scenario is considered more likely under Theresa May’s administration that has shown during the Conservative Party conference in Birmingham to prioritize control over EU migration over… well, just about anything.
The best case scenario is a Norway-based model, which means Britain retains access to the Single European Market. In this scenario, Scotland would see a 12% drop in goods exports and 8% in services. Scotland loses 30,000 jobs, with average workers losing approximately €900 pounds a year in income. That corresponds to a €3,5bn loss.
In both the good and the bad scenario trade, transport, storage, professional services, research and development, and public administration stand to suffer the most.
There is also an intermediate scenario.
Scotland has it better
The Scottish government, this summer, projected the Brexit “opportunity cost” to range between €2-and-13bn.
Many of the effects on the Scottish economy are considered a spillover rather than a direct effect. Overall, Scotland will be less attractive to live, work, study, and invest in. The Scottish press and local MPs have also on occasion stated they do not trust London to replace structural funds for investment in infrastructure.
Scottish National Party and Green Party Members of the Scottish Parliament have time and again supported that Brexit should be averted, even if that means an independence referendum. Even Labour talks about a “Brexit gamble” that is leading towards a “constitutional” crisis.
Reacting to the study, the Scottish Conservative Party economy spokesman, Dean Lockhart, underscores the comparatively smaller impact for the Scottish economy. He also says the Scottish government should not treat the study as an excuse for poor growth. In an indirect comment on the study, he spoke of “speculative models.”
The U.K has been warned
In March, the former Prime Minister Sir John Major warned it was “highly probable” Scotland will seek independence in the event of Brexit. The “No” in the 2014 independence referendum prevailed by a small margin of 55-to-45%.
Nicola Sturgeon has since June evoked the changing constitutional circumstances of the U.K that would justify a second referendum. In fact, the argument was made since March by Gordon MacIntyre-Kemp, the founder of the business Scottish independence lobby in Brussels.
In 2014, one of the main arguments of the “Yes” – for remaining in the U.K – campaign was that Scotland would lose membership of the EU.
However, Scotland also stands to lose the pound and access to the British market, as well as internal transfers that balance the Scottish public deficit, which is currently high owing to the sharp drop in international oil prices. Scottish exports to the U.K are four times the value of exports to the EU the Financial Times estimated in March.