 Good morning and welcome to the seventh meeting of the committee in 2019. I'd like to remind members and the public to turn off any mobile phones and any members using electronic devices to access committee papers during the meeting should ensure that they are switched to silent. The first item of business on the agenda today is an evidence session on the report No Deal Brexit, Economic Implications for Scotland by the chief economic adviser. I would like to welcome Dr Gary Gillespie, who is the chief economic adviser and Simon Fuller, who is deputy director of economic analysis of the Scottish Government, and welcome you both to the meeting this morning. I understand that Mr Gillespie would like to make an opening statement and I invite him to do so. Okay, thank you very much, convener. It's a pleasure to come along this morning and give evidence on the... sorry, is that...? That's fine, that's fine. Yeah, that's fine. Give evidence on the report. I'd like to just make some opening remarks to cover some background to the analysis if I can. What is different to No Deal relative to the earlier work? I'll say a little bit about why we chose the particular scenarios and finally what the results imply. I'll take a few minutes, though, because it obviously will follow up with questions. Firstly, on the background to the analysis, this draws on work that we've done within Government over the last two years. It draws on external analysis as well. In a sense, it presents... The paper was produced in a way to try and articulate in a clear and neutral way the impact and transmission channels through which I know, Deal, Brexit would impact. So it's based... It draws on two-year work, a lot of our analysis, and my personal and professional judgment in terms of the results. Now, so what's different from this analysis relative to what we previously published, the work that was published in Scotland's place in Europe and other places, and the difference really is that in all of that work, the central assumption was that there would be an orderly transition, that you would move from EU exit into a different arrangement, but it would be done through an orderly basis, and that's really the central difference to what. What that modelling does is essentially says that over a 15-year period, the growth in the economy will be lower due to leaving the EU irrespective of what arrangements you get to, but it's a transition, a managed transition, and the impacts are over a period. So it's not immediate in the terms of a negative impact or recession, whereas with no deal essentially what you're focusing on is alongside the long-term structural changes, you've got the immediacy of the impacts, and I'll say a little bit more about that when we get on to the papers. So the two scenarios that we outline in the paper essentially reflect scenario one is a short supply-side shock to the economy. So all what that tries to capture is this notion that the economy is functioning well and you have a disruption, and that reduction can reflect legal, regulatory, transport, logistical challenges, and essentially that restriction impacts on how the economy outputs. So if you think back to the early 70s when we had power strikes, OBR used that as an allergy to say that the economy was working in a three-day week, that's a classic supply-side shock, or extreme events where you have bad weather which impacts the flow of goods within the economy. So that was a kind of supply-side scenario one shock. Scenario two essentially says, well, in that initial scenario we view that as a short, sharp shock with the economy recovering. When you then go into scenario two you're looking at this being more prolonged and starting to impact on business cash flows, household confidence, and starting to impact on the demand-side of the economy, and that brings with it a set of additional impacts and prolongs the impact of that. So that was why we did scenarios one and two, and that was why they are set out as projections, because there's uncertainty around how the final form of Brexit will materialise and what the impact will be across a range of sectors. So a sense of Brexit represents a term of trade change to the economy. That's how we would view it in economic terms. You're changing the basis for how the economy operates. Now finally, if I just say a little bit about the results, so the methodology and the results that we set out are very similar to the other work, both done by the Bank of England and the UK Government. The results that we published on the 21st of February, as I said, bring all of that together, set out the kind of channels, transmission mechanisms for how this would impact on the economy and the range of scenarios. So to get to the key messages from the analysis, what we are saying is that, despite the best Government mitigation or mitigation, no deal will impact on a sharp shock to the economy. It will lead to output falling, and the range within the scenarios that we've modelled is from GDP growth falling in Scotland by 2.5% to 7%. With that type of shock, you would see that manifest itself in the labour market. We would see unemployment from its record low levels at the minute, beginning to rise as firms respond to the challenge of reduced demand, supplies and cash flows. On the wider macro side, we see exchange rates, inflation, migration, exports and FDI all being impacted by this, so it's quite a significant shock. Our results are broadly in line with the UK. Their worst-case scenario for no deal is 9.3% reduction, which is over a longer time period, and the range for the Government's deal is within a negative 2.5% to 3.9%. What you're seeing here is that there's a consensus across the analysis, certainly the published analysis from the UK and the Bank of England and the Scottish Government that Brexit will have a negative impact on the economy. There's a debate around different transmission mechanisms and the impact of different deals. The intention of the work was to set out clearly the channels, potential impacts, range of impacts so that we could think about how the Government would respond to that and also to engage the wider business sector in the potential impacts of this. The final thing that I haven't mentioned is just to say, and I'm sure that we'll come on to this, is that the impacts of Brexit, unlike the previous recession, are likely to have a sexual and geographical focus that will be different, and that reflects the nature of the shock and the types of impacts that are all to be met. Okay, thank you. Can I ask whether other scenarios that you could have analysed? You chose two that you've outlined for us this morning. Were there other options that could have been discussed? Also, the Fraser of Allander Institute, who has written a blog on the report, have emphasised that it's not a forecast, and they've made clear distinction between its scenarios rather than forecasts. I'm interested, and you have briefly referred to how the work would be taken forward, what the purpose of the report is, but can we say why those scenarios were chosen and what the expectation is that the report can achieve? On the scenario point, it's interesting that the UK Government report that was published last week is based on scenarios as well, so they aren't forecasts, and they can't be forecasts because you can't be certain about this given the range and complexity of variables. If I go back to what I was trying to outline about scenario 1 and 2, what we're doing is setting out a range from a minimalist short shock that would impact predominantly the supply side. If you think about logistics, transport, constraints on business, new administration costs and adjustments, they could be short-term, and the economy comes back to a wider, fuller effect that it transmits to the economy. In a sense, you've got a range of scenarios, and within that there could be different impacts. Some sectors may be less impacted, others more so. The demand side could be less important or more important, so within that range, in a sense, you could view the scenarios as two endpoints, scenario 1, scenario 2 rather than that. On your question about other scenarios possible, I've been interested in your views about what else we could have modelled. I think that we've tried to do it from an economic perspective, thinking about the supply side, the demand side and then how it comes together. The articulation of scenario 1 and 2 is to try to help people to understand that different impacts have different shocks. That was really for thinking about how we would respond to those shocks and to think about how that would impact in the business community. I suppose that there are potentially other scenarios that you could do, but I think that they are broadly all covered within that range. That's helpful. I might just ask a question about mitigation. That might not be the purpose of the report to consider mitigation, but you've outlined the potential impact of anodial Brexit. Is consideration given to mitigation policies brought in by planning by the Scottish Government or the UK Government? You will be aware of the report that we have had from Tony Mackay, Professor of Economics. As part of that, he suggests that there are perhaps mitigation—you have not considered where mitigation could be brought in—the report almost assumes that those scenarios happen if there is no action taken by the Scottish Government or the UK Government or insufficient action taken. He suggests things such as the role of the Bank of England, where that would fit into any of those scenarios. What kind of mitigation do you feel the Scottish Government or the UK Government are currently undertaking for anodial scenario or should be taken? I think that, on the mitigation point, we are consistent with the UK Government analysis that essentially says that, despite Government mitigation, no deal will have a significant impact on a number of areas. Essentially, there is an omission that you cannot mitigate the full impact of that. The reason for that is that it is not a unilateral thing that you are dealing with. It requires businesses to be prepared. It requires reciprocal arrangements from the EU and changes to customs and procedures. It is not something that is in the gift of the UK or the Scottish Government to fully mitigate. I think that the point about what the policy response is—I think that that is what Professor McKay is getting at—would be the policy response in the advent of a no deal, and would that essentially shift the projections from the worst case closer to the better case? It is probably worth—in thinking about that, the immediate response to Government is to think about the supply-side constraints. It is to think about what businesses need to function, new information, new processes, customs, if there are logistical shocks, how you use those. The UK Government paper also cites the bottleneck in terms of transport links into the UK, so that would be your initial focus. That is consistent with the supply-side scenario in which we see a short, sharp shock with the economy coming back. It is implicit in that scenario that there is some mitigation. Obviously, when you get into a full-blown shock supply and demand, then there is a role for the Bank of England and the Treasury and others in terms of stimulating economy. It is probably worth saying that the last financial crisis that led to a major recession in 2008-09 fell by more than 6 per cent at the UK level. Unemployment in Scotland increased from 4 per cent to more than 8 per cent, and there was a massive response from Government at that. If you remember, we had interest rates cut overnight from 4.5 per cent to half a per cent. There was a quantitative easing programme that essentially pumped money into the economy through the banks. There were reductions in VAT for a short period to stimulate consumer confidence. Alongside a global stimulus that was being co-ordinated to support the banks, a Government response will mitigate some of the impacts, but you could not model it in this context. It is done purely to set out the transmission mechanisms and how those would impact on the economy. Evidence from previous recessions is that Governments cannot fully mitigate this. There are natural business cycle issues that will come in through this, and the Government cannot fully respond to that. I will pass over to Ross Greer. I would like to pick up on the issue around employment that Dr Gillespie raised. Obviously, anyone would expect an economic shock to result in more unemployment, but there is the other side of that, which is a rise in under-employment that we saw off the back of the last economic crisis—more people in part-time work, precarious work and low-wage work. Have you done any modelling around the impact that that would have when people are still in work? The headline unemployment figure has not risen particularly high, but they have far less spending power than they would have otherwise had. Under-employment is those in work that want to work more hours. You are right that we have seen that increase substantially during the last financial crisis. Even as the headline unemployment rate came back down, under-employment was slow. The under-employment rate now is broadly back to where it was at pre-recession levels. It is an important point because that would be the mechanism for how the labour market would be impacted. People on more flexible contracts in the face of cash flow or business issues, firms would start reducing hours for people. Essentially, a more flexible labour market means that the headline rate may not rise as quickly as before has, but you will pick up in under-employment and people starting to demand or lose hours in that context. On your specific question, we have not modelled under-employment at this stage, but it is correlated to the unemployment rate, and we have seen that from the previous recession. To move on to issues of trade, there has been quite a bit of coverage recently of the UK Government's struggles in trying to roll over the trade deals that the European Union has and 69 key deals that have been highlighted. Of those, they have rolled over eight at the moment, nine if you count the deal with the Palestinian Authority. The Swiss one is significant enough that it is about £8 billion worth of UK imports and £6.5 billion of exports, but the others are Madagascar, £30 million of imports and £19 million of exports. Have you done any modelling and will you continue with live modelling of the deals that the UK Government does manage to roll over and the impact that they have on Scotland? As you said, there are significant geographical and sectoral differences here. Just to give you a flavour, what would be the implications of leaving the EU over a 15-year period? Within that, we looked at the evidence from the UK National Institute and other bodies for what would be the likely impact in trade with the EU, productivity, FTI, et cetera. In that sense, what we essentially model is reductions to the EU. Obviously, there is a broader sense of trade agreements that are integral to the EU schedule with the WTO and their own agreements. We have not modelled them in detail. They are implicit in the kind of dislocation that you would have. It is fair to say that the UK Government cites in its own paper that was published last week that the falling off of some of those trade deals is a real risk for some sectors of the economy. I think that they cite that they concede that the deal with Japan will not be ready in that time and that would obviously have implications for that. The immediate impact of those deals falling is the kind of basis for the trade and the arrangements around tariffs and other things. We have not modelled that yet, but it is something that we will continue to look at. There have been a number of suggestions that, as particular deals are not rolled over, even the trade and relationship with the European Union is disrupted. That UK exports would obviously struggle in that regard, but so would inputs. The examples that are typically used around food, where there would be certain foods that you would expect far less of that to be coming into the UK, but certain foods produced here that we would simply export less of. Have you done any modelling of perhaps the compensation effect there, where some of the taboids have essentially put it that we would just have to start eating more salmon here, for example? Yes. We have not modelled that, but there has been work done internally looking at the basis through which you could call import substitution if you have got goods that you can no longer get to market, the ability to supply them into that market. What we say in the paper in a sense is that, based on the analysis and the impacts of EUs, exports could fall up by up to 20 per cent, but, correspondingly, alongside that, imports would fall as well. If there were issues at the border or customs, it would work two ways. Essentially, that would provide an opportunity for some goods to be supplied locally, but it is not straightforward. It is really for businesses and firms to think about their markets and their opportunities internal. If you think about the food industry in the UK, it is done through the supermarket's wholesale. It is very logistically based on how inputs come in and goods are made, so there would need to be significant changes to that model. What on-going work will you be doing? You, like everyone else, are hostage to fortune with everything that you publish at the moment and the significant changes that happen week by week and day by day in this process. What work will you be doing going forward to adapt any of the projections that you have already made on the basis of what direction we could be heading in? We are 29 March three weeks tomorrow, so in that sense it is probably futile to do more modelling of impacts. We have set out two scenarios that are quite particularly grave in terms of the potential impacts. For us, it is looking at what the final shape of EU exit takes. I mention that because there could be concessions for some sectors over a transition period based on last-minute deals. Essentially, the key thing in my role as chief economic adviser is to look at what happens immediately after and use our intelligence data analysis to pick up and verify or not the types of transmission mechanisms that we think are impacting. We are thinking about how we monitor in real time the potential changes that will impact the economy through the firm base, through transport logistics and confidence, so that we are in a better position to advise ministers and think about what response you would put in place at different times. The immediate resilience work in the Scottish Government is obviously focused on the major resilience challenges. The economy is part of that, but the economy will lag the initial impact. I want to turn to the issue of migration. As we know, all of Scotland's population growth over the next 10 years is expected to come from migration, and therefore, any significant impact on that would presumably have other significant impacts on our economy. On the no-deal scenario, what impact would you understand that would have on international net migration? I agree entirely that, on net migration, what we have assumed in the paper is essentially Scotland benefits at the moment from just over 13,000 migrants a year coming into the economy. We have done previous analysis that shows the benefits of migrants in terms of enhancing the labour supply and the contribution that they make. I think that your point about the impact on the working-age population and the broader, declining population. We have local authority areas in Scotland at the moment with the declining population. Migration first and foremost is really important for your population base. Secondly, it is really important for your working-age population. Thirdly, a part that is often missed is that there is a source of demand in the economy as well. If you look at the performance of the UK and Scottish economies over the last 15 years, a substantial part of that growth differential just reflects differences in the population growth, so the size of the UK economy but the rest of the UK economy is expanding more. I think that your point around what would no deal impact on migrants. We know from the evidence over the last couple of years that the number of migrants is starting to reduce coming into the UK and Scotland. We know that the depreciation in sterling has a negative impact on the attractiveness of the UK and Scotland for migrants. We know that the migrant population is really important for certain sectors of the economy and that they bring particular skills that we would not necessarily be able to replace quickly. It is interesting that the Scottish Fiscal Commission and its forecasts have a much more pessimistic view about the working-age population and how that will constrain growth in Scotland. That is driven by assumptions around less migrants and that ability to do, but maybe I will let Simon come in if you want to add anything about the modelling work. On your point about the longer-term impacts and such like, we published some analysis last year looking at what different migration levels could have for Scotland's economy in the long term. We essentially used a baseline, a scenario where Scotland was remaining in the EU, and then we then looked to see what if EU migration fell by 50 per cent and what if it fell by a level that should be required to achieve the UK Government's then target of getting migration to the tens of thousands. What that showed was that if you had a 50 per cent fall in EU migration, you would be looking at Scotland's economy being about 6 per cent smaller by 2040 than would otherwise be the case if migration continued at the levels that we have seen over the past five to six years. That would mean GDP of about £6 billion to £7 billion and feeding through to tax revenues of being about £2 billion to £3 billion lower. In the longer term, it is a key driver for overall output and public sector revenue growth in Scotland. The only final thing I would add to that is that sometimes when we are talking about migration levels, it is not just the fact that migration boosts your overall labour supply, it is also a fact that they bring in very discrete skills, very specialist skills and also allow your economy to be much more connected and networked into wider international economies. It is very much more than just the totality of migrants in Scotland, it is also about wider economic benefits and impact that we have on Scotland. It is important when we talk about migration to remember that there are other issues aside from the direct issues involved. In that regard, the committee had the opportunity to have a discussion with Professor Manning of the Migration Advisory Committee some weeks ago now. Many committee members were quite surprised that, on questioning he conceded that there had been no specific modelling as regards their work in terms of the position in Scotland. I think that many of us found that rather surprising. Were you aware of that because their work fed into the UK Government's policy paper? Were you aware, if you have been doing work as far as Scotland is concerned, that there was this development in terms of Westminster but that it had taken really no account of the Scottish position? Moreover, Professor Manning seemed to indicate that in terms of the overarching concern from his perspective of pushing wage levels up, that you could then just see other sectors go to the wall, which may have sadly lower wages, but within contexts that are well understood, including in Scotland agriculture and tourism, and they seem to be dispensable in terms of this new shining approach to life as we know it. Were you aware when you were working on your various papers, including the paper that we are looking at today, that there was this approach going on from Westminster? We were aware that there was a report being compiled around that issue. I believe that I would need to check that the work that we have done was provided to the committee through our ministers around the impact in Scotland, the different view of migration, the extent to which the 180,000 EU workers in the sectors contribute. I think that that was shared with them. Manning, have you ever come to you? No, I never spoke to Professor Malin, no. What about you, Mr Fullard and Professor? That's a pity, because perhaps that could have helped informed the UK Government's position. Thank you very much, convener. To Dr Gillespie's earlier points that you made in your introduction remarks about the measures taken in the context of the two scenarios that you've painted out in those papers, there's a plan, I take it, for both scenarios. A Government plan. Yes, yes. Have we seen that? Let me try to explain a little bit around the plan. In setting out the scenarios, you're setting out scenarios so that you can understand the channels and transmission mechanisms through which this will impact in the economy. You can then look at and say, what's the role of Government? Can Government mitigate that? Where is Government's focus best place? If it's logistical, if it's a customs issue at the port, then you need to, if it's a, so take it's a customs issue at the port, that you don't have inspection ports in place, that you don't have the right customs, then the Government response to that would be to try and enhance that capacity. If it's an impact at the firm level, where firms don't have the information or knowledge or understanding of what being a third country trader now implies, then that's a different type of support, that's information, that's maybe new systems trying to enable firms to understand the implications of that. I appreciate that there's all these things that you're describing in the context, but is there a plan? Can I see a published plan of all these different scenarios, because it's all very well-doing scenarios, but unless there's then a plan that business can respond to and feed into, we can have all the economists we like in the world, but people need to get on with their business on whatever day this happens on. I suppose your question about a plan is, is there a plan? There's a plan in place, but the key thing about the plan is that the plan can't mitigate across all of these areas, and it's important to think about the Government, any response. The reason I was trying to give you the sense of the channels is that this is so complicated and multivariated, the Government wouldn't be able to respond across all of these different areas, and actually the timing of when you would respond would obviously reflect what's actually happening on the ground, so you would have to respond in real time, so you can plan for logistics, you can plan for extra customs officials, you can plan for engaging the enterprise base, you can plan for a number of issues, but until you actually have to put that plan into place, it's not really that. Until you actually know what you're mitigating against, I suppose that's the point. I think I nearly understand that, except that in a logical order of things, I assume that policy construction in the Government is to have the scenarios that you've articulated this morning, or you've articulated, I should rather say, in this paper, and then for policy makers in the Government to draw up the plan that's going to deal with both those scenarios. Yes, yes. And that's been done, and that's published? Yes, so part of the reason for, part of our desire to publish this analysis was to try, so we've spoken to local Government about this analysis, we've spoken to our enterprise agencies, we've been presenting this work to ministers within Government, but the point of putting out the scenarios and central assumptions is to enable people to think about how would you respond to that? Indeed, and I think people are doing that. I'm asking what the Government's doing, I think all these other parties are absolutely doing that. So the agencies are part of the Government, so skills development in Scotland would be part of any Government response, Scottish Enterprise would be part of any Government response, Transport Scotland would be part of any Government response. Individual Cabinet Secretaries are obviously concerned with their own particular issues, and are raising issues with UK ministers around the impacts in their particular sectors, so it's not, there's not a magic lever that the Scottish Government pulled, it would need to be co-ordinated with the UK as well. Of course it would be, but again I'm asking where is the, where is the published plan? So there's no published plan as of yet? No, there's no published plan. But there's no published plan at the UK level either? No, no indeed, one of the criticisms we're all making of them. Yeah, yeah, so what you can, what we've heard from the UK is that the Bank of England will bring forward particular measures, but we haven't really heard much else around what a plan would be. Okay, just can I ask you, on your conclusions, the final paragraph of your conclusion says the agriculture, food and fishing sectors are among those who have a particularly high level of exposure under a no-deal Brexit, I couldn't agree more. What do you think the impact is on fishing? So, so let me explain why we, so those sectors, the sectoral analysis first and foremost is based on what sectors we think will be most impacted by no-deal, so obviously fishing agriculture have particular specific arrangements within the EU at the moment, so in that sense they are part of this, of this impact. It's on the fishing side it's more nuanced because obviously we have within that sector your fish processing as well and the arrangements are much more complicated, but essentially for that sector in particular there's a real concern that there'll be a major dislocation that actually the processing sector, do you mean? Yeah, processing and the landing sector because there's real issues about how you get goods to market and if you think about a frictionless market at the minute and if you think about introducing new export health certificates for different elements of the fish sector and the processing impact that that would have, so that's why that sector along with agriculture in other sectors are high risk no-deal sectors, they were also identified in the Bank of England work and other work has been sectors that would be really really impacted by this. Now I think where your question is going is in a sense is maybe in a new arrangement out with the EU, could the fishery sector be benefiting Scotland? Is that where you're thinking is? I think it's important to recognise the difference. I'm not here to make statements about what I think, I'm here to ask questions, that's kind of normally how I understand Parliamentary Committee's work. My point is, the question I'm asking is, I'd rather this paper had reflected that if you're going to talk about fishing you're assuming it's all bad, that's the implication of this paper, that's not the case. No, I think there's a level of detail that you're alluding to within each of these sectors, so for fishing, fishing is certainly a sector that would be impacted over what time period it would become good is a different question, so I'm not. This is an economic assessment at the macro level including sectors. Now within every sector, in my opening remarks I made the point that essentially EU exit reflects changes to the terms of trade for sectors across the economy, and essentially a long-term model ensures that sectors will adjust and other sectors will emerge, but the fishing sector is one sector that will be impacted. Okay, it's just that in the conclusion that there are only three sectors that your conclusion specifically mentions, I think you're right on agriculture and food, I just think to simply say to lump fishing in as you have just to say it's all bad is not true, you absolutely cannot say that. It doesn't matter what I think, don't get me wrong, it doesn't matter what I think, it's just that to say the catching sector will be, in effect you will imply in this report that the catching sector will be adversely affected, you don't know that. No, but I suppose in a sense again... I think you're right about agriculture, absolutely know that's true on agriculture, they're not on fishing. Yeah, well look, we will know with the evidence or not. Okay, thank you. Alexander Stewart. Thank you very much. We've talked about this morning the UK and the Scottish Government putting together the guidelines, and when you're looking at local authorities, many local authorities already put in some scenario planning, they've also talked about some of the contingencies that they require to have in place to ensure that some of the sectors and some of the parts and the departments within local authority are some way protected depending on if there is to be a no deal scenario. So can I ask you to broaden out a little bit and give us a flavour of what authorities across Scotland do you think, and do you believe that there is sufficient preparation being done within these local authorities to mitigate and to manage a no deal situation if and when it occurs? Okay, so I think it's fair to say that the paper which we published was about the economic impacts of no deal, and we didn't set out the policy response on readiness of local authorities or the Scottish Government, that wasn't part of the analysis. What we do know is that local authorities are preparing the resilience committee that has been set up, operates across Scotland, involves local authorities, and essentially local authorities are part of any response, and they're looking at it across their workforce, the services that they deliver, the provisions that they have to provide, and also their specific roles around environment, health checks and things that would be impacted on that basis, but it's worth saying that no deal has an immediacy of impact, and essentially until probably September last year that the central assumption would be that there would be a deal of source and a transition period, which would essentially mean that everything would stay as it is until through into January 2021 or whatever. So there's a real challenge for, there's a real challenge capacity and others for sectors and parts of government to respond to something that potentially is coming so quickly. But as I've said, you know that local government already are going through this whole process on a date three weeks time, hence if we do not find ourselves in that situation. Do you anticipate a massive knock-on effect on local government, or do you think that it will take some time for it to filter through? Because obviously the social and healthcare sectors are one of the biggest parts of local government at the moment they're working to the capacity and doing all they can. An implication for no deal may have an implication to staffing levels, but that's not going to be imminent. It will happen through time, but if they have already got scenarios and contingency plans in place, then we may all be mitigated for that one sector within local government. Economic development is another sector that local government deal with, but once again that may take time for that to manage for situations to occur. And other sectors support that, whether it's the Small Business Federation or the Chamber of Commerce or other organisations that come into that whole process. So there is an impact that you identify may well take place, but how would that impact be managed in the timescale in six months, a year or wherever, where there would be a crisis, because you've heard in other sectors that the crisis would happen nearly immediately in some of the scenarios that people have tried to bring forward and say that would be the case? So again going back to the point, I think I made multiple remarks around there'd be a sectoral and a geographical impact and that essentially not all impacts would happen immediately and it would happen at different times. So if you think about, I think you mentioned health and social care, so the labour market in Scotland at the moment unemployment's under 100,000, there's real pressure around getting people into those sectors to provide the services. So that's unlikely to change immediately unless there's a real fall in the migrant labour which could have an impact in that type of provision into that sector. On the economic development business readiness, business gateways are obviously a part of the wider enterprise system and they're connected into readiness work that's being done with Scottish Enterprise and others around thinking about how to respond to the business base. So again the point is that those impacts may not happen immediately. The business impacts could be more front-loaded depending on particular sectors and how quickly our dislocated sectors become. It's worth, if you think back to the last financial crisis, we had a relative lag maybe about three, four months before unemployment in Scotland really started to rise and we had a period where it rose from around four to over eight per cent over a period of about around 11 months and then it stayed at that level for a period before coming back down. So there's lags I think in my earlier response to Mr Greer. Companies will respond through cutting hours first and maintaining people within the business and maintaining their skills and then it comes to a point where if it's structural change that's needed then you see the increase in demand but you see the impact of that through the wider, wider labour supply. And a number of local authorities have been awarded good financial management by Audit Scotland and others who come in and look at their scenarios and how they're planning and how they're processing. There's a number of local authorities that find themselves not in that situation, they find themselves in a very difficult situation financially. So a no-deal situation would have a massive impact potentially on some of those local authorities that do not have that resilience and do not have that resource to pull upon the other local authorities may have as a cushion going forward in the sole process. Do you have any views on that? Well only in the sense that if you take the no-deal scenario to its fullest extent and that you have the channels that we've identified particularly the rise in unemployment, falling output, more stress in the business sector, then all of that will feed through to public finances as well and in that sense you will have impacts. It would be a totally different type of response that would be required from local government, from all forms of government. You're in a different ballpark, a different scenario. Are they in a worse situation or a better situation in some other sectors then? Is local government in a dire need or a dire situation in comparison? Will it have the biggest impact on across the services that they provide locally to communities? I couldn't really comment on the provision of the different local authorities for their own services. What would say is that local authorities are obviously key providers of services and they'd be part of any response. We've identified in the paper local authorities that we ranked as being the most, potentially the most, impact. That was more on workforce rather than financial. That was based on workforce and that was based on the Bank of England's no-deal sectors most likely to be impacted in no-deal and it was based on the proportion of that employment in those sectors by local authority. Obviously people commute in and out of local authorities so I was trying to put a handle on the economic dislocation that could happen within those sectors. In a sense the sectoral pattern of that reflects where those sectors are. It's the north-north-east and some central belt as well. Where the population is or where the population isn't depending on where you can find that because they bring in different aspects to whether they can cope with the scenarios or not, as the case may be. Well, in a sense I suppose there's different ways you can view this. If it's an economic shock impact in those sectors then it's a response that's required beyond the local authority really. If it's local authority public services it's a different thing. It's an issue of foreign direct investment. The report that's been produced has been very useful. Page 16 highlights Scotland's success in attracting FDI over the course of the last number of years. It gives the example of some 160 new FDI investment projects in Scotland that's a 7% increase from 2016. Can you provide some further detail in terms of the number of jobs that have been created as a consequence of that but also the actual quantum of investment that's coming to Scotland? The main source that we use for looking at inward investment in Scotland is the EY attractiveness survey. That's good for giving you both the number and the volume of projects. It's probably worth saying that there's a stock of FDI in Scotland and the way to think about that is the businesses that are owned by non-UK operants. For instance, we have around 2,600 foreign-owned businesses in Scotland to employ around 330,000. Within those there's approximately about 1,100 are EU-owned and they contribute 121,000 jobs to the economy in Scotland. That's the stock. What we've seen from the figures that you've referred to is that Scotland continues to be an attractive place for inward investment. Inward investment is really important for the economy alongside the traditional benefits of the investment, the employment. A lot of inward investment that comes to Scotland then exports, also brings benefits to the supply chain. There's also wider benefits around exposing companies to different systems, new management techniques, supply side benefits. There's a recognised value that inward investment largely brings benefits to the economy and that, guys. One thing I would say is that Scotland has done well in inward investment. The number of projects competes really well, but we're probably seeing a change in the nature of inward investment coming in, so it tends to be more niche R&D data, digital, smaller projects, which are less capital intensive. That's really positive in the sense that Scotland is really attractive for these types of companies' investments and places to do knowledge-based R&D, digital type work. The flip side of that is not being the traditional plants, there's less direct capital investment on the ground. So, I suppose what I'm alluding to is that this type of investment could be more footless than previous, where you invest a substantial amount of plant. In the report, we took on from the Bank of England work around the estimates around the potential reduction of inward investment in Scotland being in the order of around 20 per cent. Thank you for that, Ben. I understand the points you're making, but on the issue of the R&D, that's crucial in terms of how business is going forward. I know that certainly from the electronics industry that I used to work in. When the R&D went, then you knew it was just a matter of time before any assembly manufacturing went, and that also did take place, unfortunately, in Scotland. You mentioned 20 per cent there, can you provide some further detail on that? In terms of an audio Brexit scenario? Yes, so in one sense, this goes back to the EY survey, so they do a survey about the attractiveness of the UK and Scotland, and they look at inward investment flows into the EU, and in their report that was published last year, they're essentially saying that they believe that the UK has already been impacted by Brexit in terms of inward investors' perceptions of the attractiveness of the UK as a location. The UK still does really well in the survey. It's the number one destination for inward investment, but there's been some slippies relative to its market share, and there's been changes within that. The electronics example you gave was a really good example of both the positive and the negatives of inward investment, and where it can create an industry. That was very much an international industry that done really well from Scotland, and changes in the market conditions then led to that industry no longer being so strongly based here. In the context of the 20 per cent fall, going back to the analysis about no deal and the impact in terms of access to markets, then essentially the ability to come to Scotland, invest and have frictionless trade across the EU is obviously a vague attraction for inward investors. Essentially what the EY report was reflecting is that uncertainty around what the shape of arrangements would be and the potential dislocation is creating negative perceptions around the UK and Scotland and will impact investment flows so companies' decisions will go to other places rather than here. That's essentially the rationale behind it. This is where two comments that you've made earlier on are extremely important, and it ties in with this aspect. The electronics industry has once again been that example. You stated earlier that the EU exit essentially affects terms of trade, and you also, to Tavish Scott, you touched upon the aspect of every government agency will be planning. This is where, for me, the aspect of what the Scottish Government have been trying to do regarding the hubs opening up and something that we've discussed in this committee before, the hubs opening up to try to get that message over to the international community, Scotland, even in a no deal Brexit scenario, that Scotland is very much open for business. In terms of the investment hubs that are opening up, have you seen a genuine collective approach from the Scottish Government and all the different agencies? To get that message over and to make sure that the activities that are taking place in the hubs are going to be effective to get that message over? Yes, that's the basis of the hubs to bring together the trade, cultural and wider benefits of Scotland into one place, to be marketed much more effectively and to reach out to the business base. The most recent hub was opened, I think, a fortnight ago in Paris. Obviously, it's a really important market for food and drink in Scotland, strong cultural links, and essentially what the hubs bring together, as you mentioned, is the staff from which traditionally would have been the Scotland Development International, along with broader staff groups, so that there's a clearer articulation of the proposition that Scotland offers across different sectors and markets. I've certainly seen that working in London and in Dublin as well, where having that concentration in place and connections on the ground can really help businesses either operating there or connections to there or different trades. It's an important start, I think. Finally, how important is it for Government ministers to take part in trade missions to help promote and sell Scotland to bring further investment into the country? I'll not comment on Government ministers, but what I'll say is that trade missions and the extent to which you can help businesses to get an opportunity in a different market is the kind of day-to-day job of Governments around the world. That's why, even before the hubs, the Scottish Development International had operations across, I think, 18 countries. In that context, anything that helps companies through culture, trade, political visits and ministerial visits has got to be beneficial to the economy. Thank you very much, convener. John Mackay, in his critique, says and I quote that the report is very biased and misleading. It's far too pessimistic assessment and is clearly intended for political purposes. How would you respond to that? I would refute that completely. I think that, in malting the remarks, I set out the basis of the report based on two years' work, based not solely on our analysis looking at the UK Government, HMT, the National Institute, Standard and Poor's work with the Fraser Vander Institute. I believe that the way that's been set out in the paper is clear. It sets out channels, scenarios and the ranges are actually modest compared to other work. The UK Government's own estimates for Scotland in the paper, the analysis that was published suggested that no deal would be about 8 per cent here. The Bank of England's unemployment projections are on the same basis. There are not many academics or independent commentators that are disputing that this would be negative. The uncertainty is around how this will actually be the final formula. That's why you've got range and scenarios. I'm surprised by that comment, but I would stand by my own analysis and work. I noticed that, in your report, you ranged from 2.7 per cent to 8.5 per cent reduction in GDP in Scotland by 2030. Interestingly, the HM Government produced implications for Brexit and trade of a no-deal exit on 28 March, 1918, on 26 February. As you rightly say, what they've suggested is that the range for Scotland is around 8 per cent within 15 years. They seem to be closer to your more pessimistic range, as Mr McKay would put it. You talked about some of the organisations that you can blaze with to speak to the Institute of Fiscal Studies. Did you have direct conversations with the Treasury? Earlier, in one of your responses to Tavie Scott, you said that you hadn't, and I don't mean to tell you personally, but the Scottish Government and others, including the UK Government, perhaps have not heard much from the Bank of England, for example. How much broader your connections were in terms of addressing that particular issue? We have regular engagement with the Bank of England through their agent in Scotland, and that is primarily on their understanding of the economic conditions within Scotland. The Bank and the work that was published before Christmas have been quite clear around its range of scenarios and impacts. The Governor gave evidence last week at a parliamentary committee, again reinstating its views. In fact, he said that if I am back here in June, I think that the forecast for the UK economy in 2019 is now 1.2 per cent. He essentially said that if we are back in June and we have had a no-deal exit, I will be coming back with much-reduced forecasts and will be in a different place. We are aware of the work in the views of the Bank of England through our connections and through the published outputs. Essentially, we monitor all the work that has been done in the published. Our initial analysis that was published in Scotland's place in Europe was done independent of anyone else. It was done by us, but based on a number of work that was done by other informed by work from the WECD, IFS and others around the potential channels and impacts, and we modelled that to that extent. However, I do not generally get a sense that people are arguing that the immediacy of no-deal, and I think that the UK Government paper last week was really clear in stating that the Government cannot mitigate against us, that no-deal would have a severe impact in a number of areas. Essentially, it quotes again the immediacy points around the abrupt nature of the transition, the lapse in trade agreements, the access to market, the late stage for many parties and businesses in preparing for this, so that they are all material factors. Nobody is saying that this will be okay, and if it is okay, then there is no clear path about why that would be the case yet. I think that there is general consensus with our work. Do you recommend this? No, the only thing I would add to that is that we have quite a regular engagement on the official level with Treasury, with DEC, particularly discussing our analysis and their analysis. A couple of weeks ago, we had a round table in Scotland discussing analysis of international trade with colleagues from the Department for International Trade, the Welsh Government and Northern Ireland's civil service. There is quite a lot of sharing that occurs and takes place in terms of the analytical underpinnings, the models that we use and so on. That is a point that I should have probably made. There is a general consistency in the methodology and approaches that are being used for the models. We use a computer-generational living model. The UK has a similar model, which they are using. The types of assumptions on how those models respond to the types of shocks are broadly similar, and that is why I would call a broad consensus of the results in that regard. One of the things that you have mentioned is that your concern about CPI inflation is significantly increasing, possibly because of the impact of sterling, depreciation and other issues. Can you talk a bit more about the impact on interest rates, potential impact on interest rates and also inflation of a no-do Brexit? Yes, certainly. In the report, we set out some assumptions around inflation, and that is based on the Bank of England work around where they see inflation going in terms of anodil. Essentially, I think that it is an increase to between 4% and 6% from its current levels. When thinking about why would you see rising inflation, essentially with sterling depreciating, import costs would rise and we would see that coming through a number of goods. You may also see some price rises across sectors as the costs of delay or additional costs are passed on to consumers from businesses. You would see an increase in inflation driven primarily through sterling depreciation and an increased cost of imported goods. Obviously, inflation reduces people's purchasing power, and I would put a squeeze on on household finances. The link to interest rates, in a sense, is again in the paper from earlier Bank of England work. They projected where they thought interest rates would need to be to much higher inflation levels. Our own view, which was published a couple of weeks ago, is that we thought that the immediate response would be expansionary monetary policy in the space of a shock, and interest rates, if anything, would likely come down immediately, both to support the banks and others in terms of maintaining confidence in the economy. The governor last week gave an equal probability to interest rates coming down as well. Essentially, the monetary situation is a legacy from the last financial crisis. We have still got really low interest rates. I think that there is an expectation at some point that those will tighten and come back to what would be a more normal level. In the advent of a shock of this scale, we would expect to see expansionary support from the bank and others in terms of monetary policy. I suppose, in a sense, that the bank's target inflation rate is around 2 per cent. It has a wider remit around supporting the economy, and it would see that as a one-off-price level adjustment. I do not think that it would respond to that in the traditional way, but that is partly the response and partly the adjustment. You have mentioned that there could be a real impact in certain sectors of the economy, such as agriculture. The Treasury's report, for example, talks about potential EU tariffs of 70 per cent on beef and 45 per cent on lamb exports and 10 per cent on automotive vehicles. One year that has not really been touched on—and it is obviously huge from Scotland in terms of its contribution to the Scottish economy and employment—is the financial sector. The Treasury has basically said that what the EU is doing is that the commission has stated that it is only focusing on areas of its self-interest for EU financial stability and that any decisions take me with conditional and time-limited. It goes on to say that the absence of action by EU authorities to make it at risk in some areas of financial services could be some disruption. How concerned is the Scottish Government about the impact on the financial services sector and employment thereof? Is it able to continue to trade effectively with European partners? It is a really important sector, and it is one of the sectors that has identified that would be impacted by no deal on the regulatory basis in a sense that the legal and regulatory framework at the minute allows financial firms to passport across Europe at the minute. Essentially, what the UK Government paper says is that you can have a term called equivalence, which essentially recognises the mutual regulatory environment of both countries that would allow some form of this to continue. However, the UK Government's paper says that that is unlikely to be in place by 29 March. What that would imply is in a sense that the ability of financial firms in Scotland to service EU markets will be impacted. In that context, we know that the financial sector in Scotland, through the banks and through different operations, has looked at how it can continue to manage money from within the EU and support its customers through opening or using European banking licences in other places. It is one of the areas that is probably underestimated by the importance of services and of the four freedoms, the ability for legal professionals and other professionals to trade from Scotland across the EU is really important. That ability to passport and deliver services is likely to be impacted almost overnight. The EU is quite different in the sense that the four freedoms have been in place since 1992, but the services side of it is really quite unusual to have that ability to trade services across countries on the basis that exists at the moment. There are very few trade deals in the world that allow that, and the financial services sector has obviously benefited from that and would be impacted. I chair the cross-party group on life sciences, and there was a presentation there from Glaxwis Smith Klein, who said that their company, which employs 14,000 people in the UK, has spent £70 million on Brexit preparations, and that is £5,000 ahead. That is money that is not going into everything from investment to salaries. What has been the impact on investment by Scottish and UK companies through having to divert resources into preparation for Brexit? I will be briefing on the next assignment, as well. Companies are already transitioning at the moment and trying to prepare to mitigate. We published work earlier last year around the impact of stockpiling, so we are seeing that that is an evident thing. We are seeing businesses increasing the inventories that they can hold to mitigate immediate disruptions. Essentially, that is skewing working capital towards holding more stock. It is just a transitory effect, so that is one particular impact. We are also seeing that where investment is taking place, it is skewed towards supply chain issues, or additional warehousing or wholesaling around Brexit preparedness. In this sense, your example is borne out by other examples. What we are also seeing is that businesses are holding cash, that they are postponing investment, and they are, if not quite bunkering down, waiting to see how that responds. Even on the purchasing managers index for February, inventories were at record highs since the series began, so that whole thing around people stockpiling, so there is definitely different behaviour in the business community. Do you want to say anything about the investment numbers? Yes, so I think what we are seeing is two things happening with the investment figures for Scotland and the UK. First of all, overall growth in business investment in the UK is really low just now, the lowest in the G7, and it has really slumped the last four quarters or so. I expect primary because companies are holding fire, waiting for the uncertainty to resolve. Partly we are seeing far lower investment figures. The second thing we are seeing is that of the investment which is occurring, as Gary mentioned, a lot of that is around Brexit mitigation at present, rather than growth enhancing investment, which would drive future growth and entering future markets. It is really the investment that we are seeing just now to mitigate the risks as companies see it rather than to try and boost future outputs in the future. Obviously, that has a short-term impact on the economy, but clearly, if that is sustained with business investment being low for a longer term, that will feed through to longer productivity growth, and that is partly why some of the long-term Brexit analysis is so negative. Jamie Greene, please. Thank you, convener, and good morning, gentlemen. I am referring back to some of the evidence that we received from Professor Mackay, and I appreciate that you may all have some differences of opinion. He did also, in his submission, pretty many aspects of the work that he has done as well, and I think that has to be noted and appreciated as well. However, point 17, in his submission paper to us, struck me, is quite an interesting comment. He said, there is little attempt to explain the recent poor performance of the Scottish economy. Instead, there is often a very selective choice of statistics. Reading section 3 of your paper, Scotland's recent economic performance, would you say that this is a fair, balanced and unbiased view of Scottish economic recent performance? Yes, certainly. Let me just explain a little bit around on these points. I published an independent state of the economy three to four times a year, and in the last one, which I published around two weeks ago, the key messages I was articulating was that Scotland's economy in 2018 was stronger than the two previous years, that it would record growth probably around 1.5 per cent, that we had a labour market that was performing back at record levels. Actually, the context for those comments was based on the impact of the oil and gas sector through 2016 and 2017, which I had covered in previous analysis in the report. We know that the impacts had a severe impact on the sector in Scotland through that period, and part of the positive narrative around Scotland's economy coming back was the fact that that sector had been through quite a transition for two years. That sector is probably quite a good example for some of the arguments about international trade and open sector. There is one price for that sector. It is a dollar price, and when the price falls from over $100 to $50, then the sector has to respond. That was a two-year response, and our analysis also showed the impact of that sector in terms of its impact on GDP, production and services. Our analysis is clear. If you look back through the different reports, the one from a couple of weeks ago was focusing on the big issue and the big risk for the economy at the moment, and I was highlighting the potential dislocation from no-deal Brexit across those sectors. Alongside the state of economy reports, we publish monthly economic statistics. Our analysis is open and transparent, so I am perfectly comfortable with what we do and how we set it out. I appreciate all the work that you do on continuous basis at analysing the economy, but why in your paper did you choose not to compare the Scottish economy to the rest of the UK's? On what basis? On any basis. In the state of the economy made a report... In this report. We are talking about this report today. Oh, sorry, this report. Which is section titled Scotland's recent economic performance. There is no mention of any comparative analysis between the recent performance of Scotland's economy versus that of the rest of the UK, and my last question is why. Okay, so that's the report that I published two weeks ago. Is it the one that the session is about? Yeah, okay, that's fine. So it's simply because it's Scotland's report we're doing and it's the impact of Scotland. In the report the week before, we have all of our analysis starts with the global economy, UK economy Scotland, and we provide the same comparators for each. And so our focus obviously is in Scotland. It's the analysis of this report was trying to provide a backdrop for Scotland relative to how an ordeal with impact. But surely that effect of what would happen in an ordeal scenario, what you're doing here is building up a case, is to paint a picture where the economy is at the moment, and presumably that would require looking at Scotland's performance as it stands at the moment where there's Brexit, no Brexit, deal or no deal, hard Brexit or no hard Brexit. So for example, you've completely missed out any of the analysis done by the Scottish Frisco Commission in your piece of work, which looks at GDP growth over the next five years. It doesn't do any comparison on productivity levels in Scotland versus the rest of the UK. So what I'm saying is that you're setting the scene as to what might happen next, but you clearly haven't painted a picture of how it is at the moment. So again, I think we're probably splitting hairs here over different papers. So this was essentially about no deal implications for Scotland, and the focus of it was around the scenario transmission mechanisms and how that would impact the economy. Your points around the underlying performance of the economy, they were all covered in the report the week before, which included forecasts from the fiscal commission, from other independent organisations like the Fraser of Allander, included OBR forecasts, included the most recent productivity data, labour market data, all of that was there. So I suppose I'll accept that we could have made the report maybe 10 pages longer and reproduced all of that analysis, but the point of this report was really about the immediate sane impact of no deal on the economy rather than... Okay, can I refer to a section of your report then, page 16? It says the lack of clarity for Brexit beyond March 19 is already starting to have an impact on key economic indicators for Scotland. Can you tell me what those are? Yes, so what we're seeing is we've just touched on investment, we've touched on investment being skewed, we're seeing that firms are responding to this or transient this, but I think the points are... So what are the key economic indicators? So look at what I want to hear is what effect is it having on GDP, productivity, employment levels? The key economic industry is the most economic misuse to analyse the economy? So we haven't published GDP for Q4 yet, but if you look at the UK publication December for the UK economy, GDP growth is slow to point one. So that was based on their analysis of uncertainty to do with Brexit. What we are mentioning in this report in my senses is what we are seeing as a material drop in confidence in January and February that's coming through... And which statistic are you using for that? So we have a survey, Scottish sentiment survey, which surveys 2,000 households and we're seeing a drop in sentiment across that. Okay, so when you make a broad brush statement like the lack of clarity of Brexit is already starting to have an impact on key economic indicators, the only statistic that you've provided is a household survey of 2,000 people in Scotland. It's not exactly a key economic indicator is it? No, I think confidence is a massive indicator and actually it's really important it's really important to think about what we're hearing from the business base as well and what we're hearing and the analysis that we did last year looking at the impact of uncertainty investment on investment suggested that essentially we know this from our engagement with the banks and sectors. Businesses aren't investing on the same basis at the moment. That uncertainty is there where companies are investing, they're investing issues around mitigation, the efficiency of the operation, not in the context of the economy and there's a wider backdrop to the economy as well in terms of the global and UK economy, so I'm clear in the sense that we are seeing impacts on the economy of that, but the interesting point you make in the sense is this is against a backdrop of record low unemployment levels, demand for services and some of that is Brexit related as well where you could have actually firms not investing in new equipment, capital, but employing people more at this time due to the uncertainty. Presumably higher employment levels as a positive? Yes, yes certainly. Can I talk about migration briefly? I'm just referring to your section pages 25, 26 labour market and migration. Can you just explain to me some of the assumptions you've made around your modelling for that? You talk about a net migration fall between 15, 16 and 17. Can you give me the reasons why there was a fall? You can come in on this, but so migration in a sense, the reasons for the fall are quite clear in the sense that we have data around the inflows of people into Scotland and when we did this modelling and earlier analysis, we took both the central projections from Register Scotland around the migrants and high and low migrants scenarios, so if the question is why would you expect? No I'm asking, you said there was a fall in migration, my question to you is what were the reasons for the fall, what do you think the reasons for the fall were? So the reasons for the fall will be perceptions of openness, perceptions of willingness to stay here. That's not what it says in your document, it says, on the back of improving economic conditions elsewhere in the EU, what's that got to do with perception of welcomeness? So what we're saying was that net migration to Scotland fell between 15, 16 and 17, but it was partly because sterling depreciated 18 per cent over that period, which is what a previous page discusses, and that means obviously that people repatriate their wages, they're worth less when you put them back into euros, so that was partly what it was about. Secondly what we saw over that period was partly a slowdown in Scotland's economy, which is oil-related, but at the same time the wider euro economy was recovering, so Scotland's relative attractiveness as it were to migrants was a bit less and thirdly, as Gary says, I think probably wider perceptions on the back of EU referendum probably also didn't impact for some EU migrants as well. And in your modelling looking at a no-deal scenario, which is what this conversation is about, have you done any modelling of increased non-EU migration when looking at labour market forecasts? Not specifically, but it's actually the way that... So you made no assumptions that there would be an increase in non-EU migration? The way, so essentially what we are talking about is a net migrant figure, so the number of migrants connected to the Scottish economy from both sources is 13,000. If you have a reduction in that, what we're simulating is the impact of a reduction in migration. The source of the migration of where the people come from is less of an issue, it's the impacts the same, and it would be the same if you were increasing migration, so we don't... You didn't model that, okay? Of course not, is that it? Can I ask one last final short question? If it's very brief, it's very brief to me. So can I ask you then, given everything that you've talked about in your document and what the conversation we're having around the potential for no-deal scenario, what do you think would be the best thing that could happen on the 29th of March? The best thing in what context? Given the discussion around how terrible a no-deal Brexit would be? Less but answered that question. Keep economic visor to the government, you'd like to think you had a view on it. Well, I think all I would say is that... Would transition be helpful, for example? No, certainly transition would be helpful. And all I would say is that no-deal brings an immediacy of impacts and abruptness, which is the catalyst for some of these impacts. And that's confirmed in the UK paper. Not consensual, no, thank you. I will allow Annabelle Ewing a brief question. Yes, thank you. Convener, just really a point of information which I thought might be helpful to the committee and which Mr Greene may not have been aware of in terms of his discussion on the Scottish versus UK economy and the relative strengths. In fact, this morning, HMRC published figures which showed that Scotland's goods exports increased by 6 per cent in 2018, double the rate for the UK as a whole. So that might just be helpful information in terms of the context of the comparison between the two economies. Okay, I think that Ms Ewing has made her point that she wished to make this morning. Well, now I'd like to thank the witnesses for coming to the session to Dr Glespie and Simon Fuller. It's been a privilege to... Could I have some order, please, in the committee? It's been a privilege to convene the committee this morning. Joan McAlpine, who is our convener, gives her apologies and regrets that she was unable to be here this morning to take part in the evidence session. I'll now move into private session. Thank you.