A recent analysis from the Office of the Chief Economic Advisor has highlighted the significant economic impact Brexit trade barriers could have on Scotland, estimating a potential cost of £4 billion to the country’s economy. This analysis, focusing on trade reductions alone, does not account for broader changes in productivity, investment, or migration.
Trade Losses in Key Sectors
The report from the Trade Modelling Report outlines how Scottish exports could experience a 7.2% reduction, equating to a loss of £3 billion compared to what might have been expected had Scotland remained part of the European Union (EU). Several key sectors are projected to be severely affected by the post-Brexit trade barriers:
- Chemical and Pharmaceutical Sector: Estimated 9.1% reduction in output.
- Computer and Electronics Sector: Expected 7.7% decrease in output.
- Agrifood Sector: A 4.9% decline in output, amounting to a £827 million loss.
Urgent Call for Action
Richard Lochhead, the Scottish Business Minister, emphasized the urgency of reversing the damage caused by Brexit to bolster living standards and provide additional funding for the NHS. He stressed that these new findings should prompt the UK Government to reconsider its economic approach. Lochhead reiterated that Scotland’s future lies within the EU and the European single market, but in the meantime, the Scottish Government seeks greater cooperation with the EU.
He stated:
“On the eve of the fifth anniversary of Brexit, these new figures highlight the urgent need to change course to boost the economy and increase public revenue for the NHS.”
Lochhead further explained that Scotland had always supported a more cooperative relationship with the EU, calling for the UK Government to align more closely with European counterparts for mutual benefit.
Impact of Post-Brexit Trade Agreements
The report is the first to specifically evaluate the impact of the UK’s post-Brexit trade agreements on Scotland’s economy. It examined the effects of various free trade agreements between the UK and countries such as Australia, India, Switzerland, and Turkey, alongside the Trade and Cooperation Agreement between the UK and the EU. The study compared the anticipated results of these agreements with the trade benefits Scotland would have received had it remained a member of the European Union.
Energy Cooperation and Economic Recovery
In the context of rising energy bills, the Scottish Government has also called for closer cooperation with the EU on energy matters. This includes accelerating electricity trading arrangements between the UK and the EU and linking the UK and EU Emissions Trading Schemes (ETS). These measures could potentially reduce energy costs and barriers to trade.
Estimates from the UK’s energy industry suggest that failing to align more closely with the EU on energy and climate issues could cost up to £10 billion in 2024/25 due to higher energy bills and reduced Treasury revenues.
The analysis paints a concerning picture of Scotland’s economy post-Brexit, underscoring the need for urgent action to mitigate the financial damage. With key sectors facing substantial losses, the Scottish Government continues to push for a future that includes closer ties with the EU and greater collaboration on economic and energy matters.
