THE risks to the Scottish economy from Brexit “remain high” with the danger of recession persisting and the delay in the UK’s departure providing welcome but only temporary respite, a leading think-tank has warned.

The University of Strathclyde’s Fraser of Allander Institute, publishing its latest commentary, declares that Scotland’s economy faces as wide a range of scenarios as ever, with the outlook dominated by Brexit.

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These scenarios range from deep recession in the event of a no-deal scenario to a pick-up in growth to a rate closer to the long-term trend in a scenario in which confidence returned and business investment was “unlocked”.

In the worst-case scenario of a no-deal Brexit with no policy response from the UK Government or Bank of England, Fraser of Allander projects a deep recession with a peak-to-trough fall in Scottish gross domestic product of 5.5 per cent.

On this scenario, it predicts Scottish economic output would fall by 1.9% over 2019 as a whole, as a result of a significant contraction in the second half of this year, and then decline by a further 1.5% in 2020.

Assuming a “maximum” policy response to a no-deal scenario, Fraser of Allander projects a 1.9% peak-to-trough fall in Scottish GDP, with contraction of 0.2% over 2019 as a whole and a 0.3% fall in output during 2020.

The think-tank’s central forecast, based on an “orderly departure at some point in 2019”, is that the Scottish economy will grow by 1.1% in 2019, 1.4% next year, and 1.5% in 2021. In a more-positive scenario in which confidence returns, Fraser of Allander forecasts albeit still-below-trend growth of 1.7% this year, 1.8% in 2020 and 1.6% in 2021.

Fraser of Allander says: “The decision to extend the deadline for the UK’s withdrawal from the EU has provided some welcome temporary respite from recent months of heightened economic uncertainty, but only for a short while with the range of scenarios as wide as ever.”

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Professor Graeme Roy, director of Fraser of Allander, said: “Last week’s announcement to move the deadline for the UK’s departure from the EU to October has helped to reduce the imminent threat of a ‘no deal’ outcome impacting upon the Scottish economy. However, it has only kicked the can down the road, with little evidence so far of UK policymakers being able to agree a compromise approach. The risks to the economy therefore remain high.”

He added: “Moreover the nature of the UK’s withdrawal from the EU is but one step in the process – the negotiations on the terms of the UK’s future relationship with the EU have yet to begin in earnest.”

Presenting the commentary, which is supported by accountancy firm Deloitte, Fraser of Allander declares that, with Brexit “dominating the headlines”, important questions about the future longer-term trajectory of the Scottish economy are being “crowded out”.

While noting employment in Scotland is at a near-record high, Fraser of Allander highlights weakness in growth of earnings and productivity. It also flags the problem of in-work poverty.

Mr Roy said: “Next month will mark 20 years since the first elections to the Scottish Parliament and, despite progress in some areas, the growth challenge is arguably still something that remains inadequately addressed in the political discourse in Scotland.”

The founder and chief executive of independent financial adviser deVere Group declared yesterday that, if MPs were serious about protecting jobs and securing long-term, sustainable economic growth, they “must now support a second Brexit referendum”.

Nigel Green, flagging a “monumental lack of confidence” among businesses caused by Brexit uncertainty, said: “As soon as MPs return from the Easter recess, they must get behind plans for a confirmatory Brexit vote. It could be done in a matter of months.”