EU future relationship

Billions of pounds would be wiped from a Scottish economy already hit hard by Coronavirus (COVID-19) if the UK Government refuses to extend the Brexit transition period, according to new analysis.

The transition arrangements currently keep the UK close to the EU and can be extended for two years – beyond 31 December - if the UK Government asks for an extension by the end of this month.

But a new study from the Scottish Government says if an extension is not agreed, Scottish GDP could be up to 1.1% lower after two years. The cumulative loss of economic activity from leaving the EU would be up to £3 billion over those two years – on top of the devastating effects of the Coronavirus outbreak.

The paper indicates there will be further major costs from Brexit for years to come and also highlights that without an extension or having a free trade deal in place, Scotland’s agriculture, fisheries and manufacturing sectors will be especially badly hit.

Cabinet Secretary for Constitution, Europe and External Affairs Michael Russell called for maximum pressure to be applied to the UK Government to change policy, as the study concludes an extension was now essential to aid any post-pandemic economic recovery.

Mr Russell said:

“Given the huge economic hit caused by Coronavirus it would be an act of extraordinary recklessness for the UK Government to refuse to seek an extension.

“The Scottish Government believes the best future for Scotland is to be an independent member of the EU - but regardless of people’s views on independence or Brexit, it makes no sense to impose additional damage on Scotland’s economy at this, of all times.

“I believe there is a growing common-sense coalition to press for an extension to avoid such a disastrous outcome and the needless damage it would do to Scottish jobs and our economy. 

“The paper we are publishing today suggests if there is no extension, then even if a basic trade deal can be reached with the EU by December,  there will be a cumulative loss over just two years of nearly £2 billion, rising to almost £3 billion if there is no deal.

“And the actual impact will be worse because the Brexit shock would come hard on the heels of Coronavirus hitting businesses at their most vulnerable and giving business and government, currently rightly focussed on this pandemic, insufficient time to prepare.

“The Scottish Government itself has been entirely focussed on helping people in Scotland through the Coronavirus crisis, and extending the transition period should be seen as an essential component of the economic recovery. Time is running out and now is the time to speak up to avoid a double disaster.

“The impacts of leaving the Single Market – whenever we leave - are bad for our economy in the long term. The UK Government should do the responsible thing and rule out now a disastrous ‘no deal’ outcome.”

Background

Read Brexit transition study.