Scottish Budget: Economy to remain sluggish amid Brexit uncertainty
Growth in the Scottish economy is likely to remain sluggish due to continued uncertainty about Brexit, experts have warned.
The Scottish Fiscal Commission said that while the economy would grow by more than expected in the next year, longer term trends were “subdued”.
Finance Secretary Derek Mackay yesterday warned his budget may need to be re-visited next year in the event of a no-deal Brexit.
But the Fiscal Commission said that even with an orderly exit from the EU, there would be challenges ahead.
The economic watchdog has forecasted economic growth of 1.4 per cent in 2018 and 1.2 per cent in 2019, an upwards revision of its predictions in May, reflecting stronger recent economic performance.
However, it said it expected annual economic growth from 2020 onwards to settle back to around 1 per cent, reflecting low productivity growth compared with trends before the 2008 financial crisis.
Dame Susan Rice, chair of the Fiscal Commission, said: “We have seen economic indicators picking up recently and we believe that the economy will grow more quickly in 2018 and 2019. There is little change in the longer term when we expect the economic prospects for Scotland to remain subdued.
“Brexit is a major uncertainty in this forecast. Our central assumption remains that of a relatively orderly exit from the EU.”
The Fiscal Commission said the Scottish Government’s budget was being increasingly determined by devolved tax receipts, with a total of £15.2 billion to be raised through taxation in 2019/20 and £11.7bn through income tax alone.
Addressing MSPs at Holyrood yesterday, Mr Mackay said his budget may have to be “re-visited” if Britain leaves the EU without a deal.
He said it was “disappointing but necessary” to inform Holyrood he was preparing for the event of a no-deal Brexit.
He said: “If Scotland is forced out of the EU as a result of the actions of the UK government, it is vital that they ensure no detriment to the Scottish budget.
“As a responsible government, we are preparing as far as possible for all exit possibilities. We’re intensifying preparations in order to protect the Scottish economy, our businesses and our workers.
“A no-deal Brexit and continued chaos from the UK government will only make matters worse. It’s disappointing but necessary for me to advise parliament that if the UK does end up in a no-deal Brexit, I may be required to re-visit the priorities in this budget.”
Mr Mackay announced a series of measures to try and boost growth including a package of business rates relief and a “small business bonus” which would be the “most generous anywhere in the UK”.
He said there would be a below-inflation cap of 2.1 per cent on business rate increases.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “Much weighs on the mind of Scottish business amongst the midst of Brexit uncertainty and a lack of stability in Westminster.
“Today’s draft budget