It has been at least 35 years since I first wrote a seasonal piece setting out thoughts for the economy in the year ahead. In none of these years has this task seemed as depressing as it does right now. Never have the risks appeared as numerous or substantial. Never has the prospect of a benign economic environment been more unlikely. Economists are often wrong in their forecasting. Let us hope that this time around my fears will prove unfounded; that the risks will turn out to be over-stated; and that stability is just around the corner.

My standard approach each year is to start out by describing a suitable central scenario, in which UK and Scottish economic performance (inevitably closely linked) tends to be unspectacular but relatively benign. An expectation of solid growth of output at some 2% to 2 ½% per annum would not set the heather on fire, but would do very nicely thank you for business, the financial markets and government. GDP growth of this order has proved sufficient to allow some modest growth in real take home pay and relatively low inflation and unemployment. It has also provided the context within which business – and indeed government – can find the confidence to invest in capital and skills, laying the foundation for rising productivity and sound growth for subsequent years.

As we enter 2019 it is difficult to identify any benign scenario, let alone one with a degree of probability sufficient to be used as the central expectation for economic and financial planning by business and government. The central expectation for the UK and Scotland has to be for an extremely difficult economic and financial environment in 2019, with all the risks – in a phrase much beloved by economists – ‘skewed to the downside’.

These risks are domestic and international – respectively self-inflicted and beyond our influence. Domestically the key risk is known to us all – Brexit and in particular the possibility of a ‘no deal’ exit from the EU and all that this implies. Internationally there appear to be two major, and inter-related, risks. The first is that the US economy could move swiftly from feast to famine, with all the positive stimuli over the past year or two vanishing like snow off the dyke. The second risk is that the US-China economic and trade tensions might rapidly exacerbate, resulting in problems for economies across the globe and (especially) the markets; and also risking a sharp economic slowdown in China. Co-incident deceleration in USA and China would be extremely bad news for us all.

The domestic risk (Brexit et al) is the most obvious and the most intensely debated. The worst manifestation of the Brexit risk would be a ‘no deal’ departure from the EU on March 29th. Even to a natural pessimist this scenario has, until recently, been largely discounted. Now we see dillying and dallying in the seemingly vain hope of achieving a vote in favour of Mrs. May’s ‘deal’: with statements that a vote against her deal would seriously increase the prospect of that ‘no deal’ risk materializing.

Given the work by the Bank of England, Treasury economists et al the downside risks for our economy – for GDP, incomes, investment, exports, employment, the exchange rate and much else - are clear and horrendous. But rather than the risks of ‘no deal’ being far too great for any responsible politicians to even contemplate, this outcome now appears a real possibility - following the Prime Minister’s self-serving game of political chicken and without effective opposition in Parliament.

Whilst hoping that common sense prevails and that we have a delay to Brexit, to permit a reasonable outcome being found, or preferably a second referendum, do not forget those international risks. The turnaround in the US is already apparent and the indicators within the market regarding future expectations are disturbing. The move to perceived security and safety is evident and influencing valuations. Economists at J.P. Morgan have developed and analysed a model based upon the historical predictive power of the stockmarket, credit spreads and the yield curve. As stated earlier economists’ predictions are often unreliable, but it is at least worth noting that this analysis suggests that, on the basis of current data and past trends, the probability of a recession in America in 2019 is now as high as 91%.

The complex matters involved with managing the US economy will not be assisted by the continuing conflict between the President and the House of Representatives over the public finances; nor by the hints that the President would consider removing the Chair of the Federal Reserve if that august and (crucially) independent institution considered raising interest rates to head off inflation risks. These bodies working together may be too much to hope for, but a degree of co-existence and co-operation will be essential as problems emerge.

And then there is the matter of a trade war between the world’s two largest economic powers. Neither is best placed for such strife at present. The Chinese manufacturing sector contracted in December, and the impact of weakening consumption growth has been shown in the recent Apple saga. The outlook is distinctly uncertain.

So many risks and so many uncertainties; but finding a sensible and least damage way forward on the Brexit front should be achievable and would lead to a more stable domestic context. Meantime, the UK can have little or no influence on those external risks. Happy New Year!

Jeremy Peat is visiting professor at the University of Strathclyde.