Brexit has exposed the Scottish economy to downturns and is affecting business investment, the nation’s chief economist said yesterday.
Gary Gillespie, the most senior economist in the Scottish Government, warned that the economy would remain subdued until the “fog of Brexit” has lifted in his latest State of the Economy report.
Politicians who backed Remain claimed the report made for “truly worrying reading”, although there were signs of a strong export performance and falling unemployment.
Uncertainty caused by the EU withdrawl process has “impacted business investment, with companies pausing key investment programmes”, the report said.
The chief economist said investment has fallen in both Scotland and the UK “for a number of quarters”, saying that since the 2016 referendum it had lagged well behind the growth observed in other G7 nations.
The number of foreign direct investment projects in Scotland fell by 19% in 2018.
The report noted: “Consumer sentiment has been negative in Scotland since the EU referendum in 2016 and notably weakened in 2018 and into the start of 2019.
“The latest data for Q1 2019 showed a fourth consecutive quarterly fall in consumer sentiment and the indicator now stands at -9.6, its lowest level since the series began in 2013.”
It added: “Until the fog of Brexit is lifted, growth in the Scottish and UK economies will remain subdued and potentially more exposed to any downturns in international demand and growth.”
A rise in economic growth in the first three months of 2019 was “driven in part by temporary factors”, such as pre-Brexit stockpiling and firms completing orders ahead of the original EU exit date of March 29.
Liberal Democrat constitutional affairs spokeswoman, Wendy Chamberlain, said: “This report makes for truly worrying reading. Our economy is faltering as the Tories selfishly air their deep divisions and argue over extreme forms of Brexit.
“As we edge closer to having a no-deal Prime Minister, thousands and thousands of people’s jobs hang in the balance, manufacturers are in limbo and foreign investment is seriously down.”
The report also showed employment had risen to a record 75.9%. Strong growth in manufacturing sector output was primarily driven by the pharmaceutical sector and spirits and wines. But increasing exports in those sectors were linked to potential stockpiling.
Finance Secretary Derek Mackay said the economy “continues to perform well” but its stability was “seriously threatened” by the UK Government’s EU exit plans.
