A NO-DEAL Brexit would cause a “major dislocation” of the Scottish economy, according to a major report by the country’s chief economist.

In a State of the Economy report, chief economic adviser Gary Gillespie says uncertainty around withdrawal from the EU remains a “live risk”, even though Scotland experienced a “positive year” in 2018, with growth in areas such as exports and a high labour market performance.

He a says no-deal Brexit would disrupt logistics, supply, trade, investment, migration and market confidence. Any economic shock “would likely have disproportionate sectoral and regional impacts and, if prolonged, would lead to significant structural change” – a shift in the ways a market or economy functions.

The report says growing Brexit uncertainty is already impacting on key economic indicators and business and consumer surveys report notable falls in confidence. The Scottish Consumer Sentiment Indicator has fallen to its lowest reading since the series began in 2013 while investment decisions by business have been skewed towards supply issues or put on hold.

Brexit uncertainty is blamed for a softening in business activity towards the end of 2018. Looking ahead, the report points to forecasts that the Scottish economy is expected to grow by between 1% and 1.5% this year – but these figures remain “highly uncertain” until Brexit is finalised.

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Finance Secretary Derek Mackay said: “Scotland’s economy continues to perform well with further growth and record low unemployment. But this is being put at risk by the increasing uncertainty associated with Brexit, and in particular the risk of a no-deal scenario.

“Brexit, in whatever form, will cost jobs, make people poorer, damage our society and undermine the democratic decision of the people of Scotland to remain in the EU.

“It is vital the UK Government takes immediate and urgent steps to rule out a no-deal Brexit – which threatens to have devastating consequences for our economy – and extend the Article 50 process.

“Our first priority is staying in the EU, in line with the overwhelming vote in Scotland to remain, and we support another referendum on EU membership. Short of that, the least damaging option is to remain in the customs union and European single market of 500 million people, eight times larger than the UK market alone.”

Scottish LibDem leader Willie Rennie said: “The Scottish economy is fragile, with low growth and businesses and consumers worried about the future. It’s clearer than ever that we need a People’s Vote and an exit from Brexit.”

Labour’s Richard Leonard said: “This report shows the urgent need to take the threat of a no-deal Brexit off the table, but also that our economy needs fundamental change.”