Harm Ongoing Two Years after Transition Period End
Two years on from the end of the transition period to leave the European Union after 47 years of membership, Scotland’s economy is continuing to feel the negative impacts of Brexit.
The cost of living crisis and recession are being felt more deeply in the UK than anywhere else, with recent research showing food bills in the UK are £210 higher in the last two years due to Brexit. The Centre for Economic Performance concluded that Brexit increased average food prices in the UK by about 3% annually in 2020 and 2021, and predicts this will worsen after all import controls are implemented in 2023.
Households on the lowest incomes are the hardest hit, with the Financial Times’ annual survey of leading economists revealing that the UK will face one of the worst recessions and slowest recoveries in the G7 due to Tory “ministers’ outright incompetence” – a recession as deep as Russia’s, CNBC reports.
According to the Office for Budget Responsibility, UK GDP is expected to be 4% lower as a consequence of Brexit, equating to around £100 billion in output and £40 billion in public revenues lost each and every year. In a report by The Economist, the Centre for European Reform estimates that, by the second quarter of 2022, Brexit had hit GDP by as much as 6%, dragged down investment by 11% and depressed Britain’s trade goods by 7%.
Businesses are suffering from lower exports to the EU, labour shortages and recruitment challenges as the Organisation for Economic Co-operation & Development (OECD) forecasts that the UK will rank bottom of the growth league table for major economies for the next two years. These issues are also affecting our NHS, with new research by the Nuffield Trust showing that lower EU migration is exacerbating staff shortages.
Scotland is additionally missing out on more than £300 million in European support under the UK Government’s replacement funding programme, which also serves to undermine the devolution settlement by bypassing the Scottish Government.
The UK Government promised its UK Shared Prosperity Fund would replace in full all EU funding lost to Scotland after Brexit. But it has only allocated £212 million to Scotland over a three-year period, when EU funding would have been worth around £549 million over three years.
The new fund is distributed exclusively through local authorities, excluding national, community and Third Sector groups, risking the loss of the services which these organisations provided.
The UK Government has also taken sole responsibility for use of the funds; previously the Scottish Government allocated EU funding to ensure the needs of Scotland’s people and communities were properly met.
Shared Prosperity has also left local authorities racing against the clock to spend their funding by March, or face losing it and see their plans reduced to tatters due to the UK Government’s delay in only now agreeing the allocations. Shared Prosperity funding is allocated over three years but delivered as single year payments, and any underspend must be returned by local authorities to the UK Government at the end of each year.
Two years on from the end of the Brexit transition period and there is simply no sign of advantages to leaving the EU – rather the damages continue to mount, not the least of which is this £337 million funding shortfall.
The UK economy is stagnating and fundamentally on the wrong path, with a UK Government set on undermining retained EU law no matter the cost to people and businesses, and the constitutional status quo offers no real alternative.
Scotland continues to be the proud European nation it always has been, and the Scottish Government is committed to giving the people the choice of a greener, wealthier and fairer economy within the European Union.
It will continue to publish the Building a New Scotland series of prospectus papers to ensure people can make that informed choice, and is determined to continue as an active and constructive participant on EU matters – an approach which will ease the process of Scotland’s future return to the EU.