This paper provides an illustration of the potential impact that a No Deal Brexit - leaving the EU on the 29th March 2019 without a transition period or agreement on any future trade deal and wider economic relationship - could have on the Scottish economy over the next 12-24 months.
It concludes that a No Deal Brexit represents a major economic risk to Scotland. There is considerable uncertainty about the duration, composition and scale of the shock that a No Deal outcome would trigger. However, it has the potential to generate a major dislocation to the Scottish economy. This would occur through a number of channels - disruptions to logistics, supply, trade, investment, migration and market confidence.
Whilst the scale of the shock is uncertain, it has the potential to push the Scottish economy into recession, with a corresponding increase in unemployment. If prolonged, the shock could lead to significant structural change in the economy.
Any shock is likely to have disproportionate sectoral, as well as, regional impacts. Sectors with high levels of exports to the EU, who are reliant on EU workers and free movement of labour, are part of integrated EU supply chains and/or are subject to EU regulatory and licencing requirements are likely to see the greatest impact. Other sectors would be exposed in the event of a wider economic slowdown.
The agriculture, food and fishing sectors are among those who have a particularly high level of exposure under a No Deal Brexit. As employment in these sectors tends to be highest in more rural areas, such regions may be particularly exposed to Brexit.