Scotland’s Finance Secretary, Derek Mackay, has warned that Brexit is already having a negative impact on businesses and economic investment.
Speaking at the Edinburgh Chamber of Commerce, Mackay said many Scottish SMEs are unprepared to deal with the consequences of a no-deal Brexit.
Mackay urged SMEs to engage with the Prepare for Brexit campaign, which offers companies practical business support and access to grants.
Scotland’s economic growth and record low unemployment is at risk as a result of Brexit, he said, attributing this increased risk to the uncertainty surrounding the UK’s exit from the EU.
He said: “Scotland’s economic growth is higher than in the rest of the UK. Our GDP grew by 1.5% in the year to September 2018 compared to 1.1% in the UK, and our unemployment rate fell to 3.6% – the lowest on record.
“Significantly, Scotland’s productivity growth has been higher than any other country or region of the UK – including London – between 2006 and 2017.
“This progress is under threat as a result of Brexit which is the biggest and most immediate economic challenge we face.”
According to Mackay, this significant knock in business confidence has the potential to trigger an economic recession worse than the 2008 financial crash, sending Scotland’s economy into a nose-dive.
The potential damage could see Scotland’s economy shrink by up to 7%, a drop in exports by up to 20% and reduced business investment in Scotland by £1 billion in 2019, the minister said.
In light of this potentially devastating impact, he urged Scottish SMEs to engage with the Prepare for Brexit campaign, which offers companies practical support.
“Last year we launched Prepare for Brexit, a multi-agency campaign aimed at creating a sense of urgency around preparing for Brexit, to raise awareness among businesses and translate that into action,” he continued.
“This is practical business support available through Scottish Enterprise’s website, offering readiness self-assessment tools and expert advice as well as access to learning and networking events, and grants for consultancy support.
“We will continue to call on the UK Government to immediately rule out the possibility of a ‘No Deal’ Brexit and extend the Article 50 process. As a responsible government we are also continuing – and indeed intensifying – our work to prepare for all outcomes as best we can.
“However, whilst we will do everything possible to prepare, we will not be able to mitigate all of the impacts of the UK Government’s approach.”
Despite the potentially disastrous economic fall-out of Brexit for the Scottish economy, companies are still choosing Scotland to invest. US-headquartered Merkle, a technology-enabled, data-driven marketing agency, has recently made a significant investment in Edinburgh with the launch of a dedicated Northern UK office.
The strength of Scotland’s digital technology sector, despite Brexit concerns, was a key motivation for the launch of the new branch.
Thomas Byrne, SVP Agency Services EMEA at Merkle, told DIGIT: “There is no doubt that Edinburgh is increasingly gaining recognition as a global technology hub, with exponential growth in areas such as data science, artificial intelligence and fintech.
“We’ve recently seen that government funding in the UK artificial intelligence and fintech sectors has reached a record high, with investment in AI now almost as much as the rest of Europe combined. Given this environment, and with ongoing government investment in Edinburgh’s technology industry, it made sense to launch a dedicated hub in the city in order to provide our clients with extended reach both across the UK and Europe as a whole.
“Although there is much uncertainty around Brexit, it looks like the UK’s tech sector is taking the lead for overall economic growth. By investing in data and analytics, combined with an understanding of consumer insights, businesses will be in a better position to gain trust from industry leaders and consumers even in an uncertain business environment.
“Additionally, with Edinburgh experiencing an influx of capital and talent from across the region and beyond, our Northern hub allows us to consolidate our full suite of Merkle services and be more flexible in adapting to our clients’ needs.”