Scotland is teetering on the brink of another recession and a Brexit could push it over the edge, a leading think-tank warned yesterday.
Strathclyde University’s Fraser of Allander Institute said it had slashed its forecasts for economic growth north of the border for 2016, 2017 and 2018 to 1.4%, 1.9% and 2% respectively.
It also said gross domestic product growth was currently slowing because of factors including the oil and gas downturn and a worsening of demand for Scottish exports.
Brian Ashcroft, emeritus professor of economics at the university, added Scotland’s weak economy could slide into recession within months, having avoided it by a “hair’s breadth” last year.
There is a “high probability” that output and growth will be damaged if the UK decides to leave the EU in next week’s referendum, he warned.
Prof Ashcroft said: “Not only would actual and potential Scottish exporters have to overcome a potentially weaker competitive position, due to lower labour and total factor productivity, they may also have to face the additional hurdle of less favourable trading arrangements.
“Secondly, uncertainty attaching to a Brexit and the terms of any subsequent arrangements might worsen Scottish productivity growth through the negative effects on trade competition, inward investment and financial integration.
“At a time when there is increasing policy concern about Scotland’s productivity and growth performance, a vote to leave the EU would place an unnecessary burden on Scottish companies and economic policy.”
Paul Brewer, government and public sector partner in Scotland for PwC, which sponsors the institute’s quarterly economic reports, added: “For some sectors, Scotland is flirting with recession and in areas of growth it is struggling to grow at a pace comparable to the rest of the UK.”
According to Fraser of Allander, Scotland is now relying solely on the service sector for growth as the contribution of construction – driven by infrastructure spending – has peaked.
But it said the service industry north of the border had grown by just 0.3% in the final quarter of 2015, with the pace of growth across the UK running three times faster.
“Financial services are especially weak and the weakness of business services growth has been exacerbated by the effects of the fall in the price of oil,” it added.
The report also said Scotland’s production industry – already in recession – had contracted for a third consecutive month, although manufacturing businesses were now seeing weak growth.
Economy Secretary Keith Brown said: “While there are real challenges, including subdued global demand and the impact of the oil price on our offshore industry, Scotland’s economy has proven resilient.”
