The Fraser of Allander Institute at the University of Strathclyde has released a report commissioned by the Scottish Parliament’s European and external relations committee looking at the possible economic implications of Brexit for Scotland.

This concludes that over the long-term of ten years or more, a reduced level of trade is expected to result in Scottish GDP being between 2% and 5% lower than would otherwise be the case.

The range of impacts is driven by the nature of any post-Brexit relationship between the UK and the EU – the stronger the economic integration with the EU, the smaller the negative impact.

In a ‘worst case’ scenario, where the UK had no access to the single market post-Brexit but opted for World Trade Organisation terms, the researchers say that in the long term (reached after around 10 years) Scotland’s GDP is expected to be over 5% (£8bn in 2015-16 terms) lower than would otherwise be the case and exports over 11% lower. Real wages are expected to be 7% lower, equivalent to a reduction of around £2,000 per year, while the number of people employed is 3% lower (around 80,000 jobs).

If the UK opts for a trading relationship which is similar to that of Switzerland, then in the long-term GDP is expected to be 3-4% lower than would otherwise be the case (equivalent to £4bn-£6bn in 2015-16 terms.). Real wages are expected to be around 5-6% (£1,200-£1,600 per year) lower than would otherwise be the case and exports 6-8% lower, while employment is projected to fall by 1-2%.

The most beneficial outcome for Scotland, according to the modelling, is if the UK opts for a Norway-style model. Then, after around 10 years, Scottish GDP is expected to be between 2% and 3% lower than would otherwise be the case – equivalent to GDP being £3bn-£5bn lower in 2015-16 terms.  Real wages are expected to be between 3% and 4% lower; for someone on average full-time earnings in Scotland, this would be equivalent to a reduction of £800-£1,200 per year.  A 1-2% reduction in the employment level is expected; this is equivalent to the loss of around 30,000 jobs.

The report also noted that ‘throughout all scenarios, the estimated negative impact of Brexit on the rest of the UK is greater than it is on Scotland, in terms of GDP, employment and other measures.’

This is because the rest of the UK's economy has greater exposure to EU trade than Scotland's, while the financial relationship between Scotland and the rest of the UK dampens certain effects.

It recommends that focus is now given to Scottish industry sectors that have close trading links with the EU – e.g. food and drink and some manufacturing sectors – to fully understand the particular issues facing them on a product-by-product basis.

The report also warns: ‘However, we also find that other sectors which at first glance may not be thought as immediately at risk from a change in the UK’s relationship with the EU – e.g. professional services – should also be considered. This analysis makes clear that Brexit is not going to be straightforward.’

Long-term Economic Implications of Brexit A report for the Scottish Parliament is here.