BREXIT could result in unemployment increasing by 0.8 per cent by 2019 — the equivalent of 21,000 job losses — a new report on the state of the economy has warned.
While the findings said Scotland’s economy was expected to grow in 2018, the paper by Scottish Government chief economist Gary Gillespie highlighted a number of areas of concern.
Not only could uncertainty over Brexit lead to job losses, it could also reduce business investment in Scotland by £1 billion by 2019. Another impact could be reduced GDP growth over this year and next year, it suggested.
READ MORE: Nicola Sturgeon’s adviser says Brexit will hit Scotland hardest
Independent forecasts for the Scottish economy point to GDP growth of between 0.7 per cent and 1.4 per cent in 2018 — with the report noting these “remain below Scotland’s long run trend rate of two per cent”.
It comes after the latest GDP figures showed Scotland’s economy increased by 0.2 per cent in the third quarter of 2017, with growth continuing “albeit at a lower rate” than the first half of the year.
Going forward weak real wage growth, resulting from salaries failing to rise in line with inflation, combined with the “ongoing weaknesses in Scottish consumer sentiment” could be risks in the coming year, the report said. But it also highlighted the “more positive outlook for oil and gas”, saying this could help drive productivity growth.
Overall it said 2018 “will be a pivotal year for the Scottish economy”, after this remained “resilient” in the second half of 2017 despite “challenging” conditions.
“Economic growth of 0.2 per cent in quarter 3 for Scotland remains notably below its long run trend rate,” it added. “However, the strengthening in the economy in the first half of 2017 has continued, albeit at a lower rate. This was supported by growth in the services sector and a welcome return to growth in the production sector which continues to be supported in part by the low value of sterling and the pick-up in economic sentiment in the oil and gas sector.
“With unemployment close to a record low, opportunities for companies to increase output by recruiting more workers will be more constrained in 2018 than over the last two years.
“As such, we expect businesses to respond by either increasing hours worked per employee, investing in workplace skills to retain staff or using automation to replace/support labour to increase output. The latter will require business investment which will be influenced by economic confidence over the coming year.”
It continued: “The pick-up in global growth over 2017 alongside the low value of sterling signals that the international context is more supportive for growth, however domestic pressures remain.”
The report was published as the Scottish Government’s Council of Economic Advisers met in Edinburgh.
Economy Secretary Keith Brown said: “The latest report further demonstrates the resilience of the Scottish economy during 2017 with encouraging signals of a slightly stronger outlook for the coming year.
“While growth has been more modest than we would have liked, we’ve seen growth in the services sector and a welcome return to growth in the production sector, which continues to be supported by the pick-up in economic sentiment in the oil and gas sector.
“Scotland’s unemployment rate is lower than the UK, remaining below last year’s figure and close to record lows while the number of people in employment has risen by 59,000 over the past year with 80 per cent of the increase coming from full-time employment.
“However, the report also notes that Brexit remains the biggest uncertainty hampering further growth, and I would once again call on the UK Government to give people and businesses greater certainty on the Brexit process,” he added.
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