Extending article 50 timetable may be essential, report warns

26 September 2018, 07:40

Holyrood

Extending the timetable for the UK's European Union departure talks may be "unpalatable but essential", experts have claimed in a new report which warns about the impact of "sleepwalking" into a no-deal Brexit.

The Fraser of Allander Institute think tank, based at the University of Strathclyde in Glasgow, insisted that an orderly transition as the UK leaves the European Union is "vital".

As a result its director Professor Graeme Roy said extending the Article 50 negotiating period - something Prime Minister Theresa May has already ruled out - could be "essential", even if it proves "unpalatable" to the UK Government.

He spoke out as the think tank cautioned: "Sleepwalking into a 'no-deal' outcome cannot be viewed as an effective economic plan."

The report also demanded: "Now is the time for effective and strong leadership from all our political leaders."

The pleas came in the organisation's latest economic commentary, which noted the "Scottish economy has outpaced the UK for the last two quarters".

The report was published less than a week after Scottish First Minister Nicola Sturgeon insisted extending the timetable for Brexit negotiations must remain on the table if the UK is to "avoid an economic cliff edge".

Prof Roy said: "Whether you agree or disagree with the decision to leave the EU - and irrespective of the nature of the final settlement - it is essential that we have an orderly transition. To enable firms to prepare and develop contingency plans it is vital that a deal is reached. Should this require more time to negotiate a workable solution, then so be it.

"Extending the Article 50 negotiation period - but maintaining the same transition timescale to 2020 - may be unpalatable for some but could be essential to protect jobs and livelihoods."

While the Fraser of Allander Institute said it expected economic growth of 1.3% this year for Scotland, followed by 1.4% in both 2019 and 20202, it stressed there was a "heightened degree of uncertainty" about forecasts at the current time.

"Our forecasts are based upon a broad-based agreement between the UK and the EU," the report said.

"Should this not happen, then our forecasts are likely to change significantly."

The think tank said it would provide more detail about the impact of a no-deal Brexit in December, but recalled it had already warned a hard Brexit, leaving the UK out of the single market and customs union, would be a "significant drag" on the UK economy.

The report continued: "It is the risk of a 'no-deal' scenario that is of most concern in the immediate term.

"Whether you agree or disagree with the decision to leave the EU - or the final agreement the UK should negotiate with the EU - the need for an orderly transition is vital. As both the Chancellor of the Exchequer and the Governor of the Bank of England have agreed, a 'no-deal' outcome would cause hardship for many firms, workers and families across the UK."

Prof Roy added: "As we outlined in June, assuming that a broad agreement on Brexit can be struck, we are cautiously optimistic about prospects for this year and next.

"However, the greatest risk to this assessment is the possibility of a no-deal outcome to the Brexit negotiations.

"Our latest work shows that most businesses in Scotland are unprepared for Brexit, with the lack of certainty over any final deal being a key stumbling block.

"As the Chancellor, Governor of the Bank of England and head of the IMF have all warned, leaving the EU in March next year with no agreement in place has the potential to cause serious disruption to the UK and Scottish economies."

Responding to the report, SNP MSP Tom Arthur said: "Scotland's economy is strong, and this report underlines that - however, the Fraser of Allander Institute are right to back the First Minister's call for an extension to Article 50.

"If, however, the choice we face is between no deal and no detail, then an extension must be on the table as the only way to avoid an economic cliff edge - allowing all alternative options to be considered.

"Of course, even at this late stage, Theresa May can escape the corner into which she has boxed herself. For two years, the SNP has been telling the Prime Minister that by far the least damaging Brexit option would be to remain in the single market and customs union - it's high time she listened."

A UK Government spokesman said: "Our White Paper outlined our vision for a principled and pragmatic plan which will ensure that all of the UK, including Scotland, is well placed to capitalise on the opportunities of Brexit.

"We firmly believe it is in the interests of both the EU and the UK to strike a mutually beneficial deal.

"That remains the goal on both sides and we are confident that this will be achieved."