Brexit insight - 21 February 2020

An overview of insights and intelligence on the implications of Brexit on the Scottish and UK economy.

Economic outlook

The latest State of the Economy report from the Scottish Government suggests that growth this year is likely to follow a positive but below trend pattern of around 1%, similar to the past few years.

Brexit uncertainty resulted in "significantly lower growth" for the economy in 2019 and remains a "live issue" for businesses, particularly in relation to EU market access.

The labour market continued to perform strongly, but with a fall in employment levels over the year, and consumer sentiment continued to weaken.

The report concludes that the economic outlook for 2021 and beyond is "crucially dependent" on the shape of a future EU trade deal and business adjustment.

Read summary statement on GOV.SCOT

Read the State of the Economy full report

Business confidence

The latest Business Survey Tracker from Scottish Enterprise's Insights & Economics Team suggests:

  • An increase in business confidence since the UK General Election, which businesses broadly believe has delivered greater clarity around Brexit, has been accompanied by businesses reporting improved hiring and investment intentions as reduced political uncertainty translates into improved demand.
  • There is also some evidence greater clarity around Brexit has resulted in actual increased recruiting by UK and Scottish businesses
  • UK service sector activity is growing again, while manufacturing appears to have broadly stabilised following a lengthy downturn. Construction activity is declining, but at a slower rate. Collectively, overall UK private sector output rose at its fastest pace in 16 months in January.
  • In Scotland, business activity also increased in January. However, there appears to be some divergence between Scottish and UK business performance – businesses in Scotland appear less confident and are reporting a more subdued rebound.
  • Uncertainty surrounding the UK’s future relationship with the EU represents an ongoing source of Brexit-related uncertainty. The ongoing downturn for manufacturers of investment goods suggests the economic certainty required to achieve a full rebound may still be some way off.
  • Outside of Brexit, business uncertainty remains elevated and is driven by slowing global growth, trade tensions and other political concerns.

Trading relationships

Research commissioned by software consultancy ThoughtWorks suggests that 1 in 10 British businesses surveyed are preparing to move their headquarters to an EU destination.

Those firms planning to move their head offices to the EU said that the measure would allow them to grow their businesses.

Read the report on Business Insider

Reform Scotland has published a research paper, Unfinished Business, which advocates the devolution of VAT to Holyrood.

The report notes that while EU law prevents variations in sales taxes within member states, this law will not apply after Brexit, and highlights previous support for the policy from the Scottish Conservatives.

Read the full report

Policy

SPICe has published a briefing on the consequences of Brexit for consumer policy - both at a UK level, and for the Scottish Parliament's newly devolved powers of consumer advocacy and advice.

Read the briefing