The Costs of Brexit for Scotland

David Gow | 11 February 2019

© 2017 SCER

Around two-thirds of Scottish voters, perhaps as many as seven in ten, believe it is in Scotland’s elemental interests to be in the European Union. In the 30-plus months since the UK as a whole voted narrowly, and on a series of false premises and promises, to leave the EU that Remain majority north of the border has grown. Yet the likelihood is that Scotland (as part of the UK) will leave the EU against its will on March 29.

Economically, socially, demographically, leaving the EU will be deleterious for Scotland. Yet every effort by the Scottish government and parliament to avert this prospect has merely underlined their powerlessness. No bespoke arrangement allowing Scotland to remain in the EU’s single market and customs union (CU), as its people undoubtedly wish, has survived the English veto. Ditto so far for the UK as a whole to achieve the same outcome via European Economic Area (EEA) and customs union membership.

As constitutional expert Dr Andrew Blick says in a new Federal Trust paper, the SNP and other independenistas suggested post-June 2016 that one of the main arguments in favour of the 300-year-old Union – guaranteeing a place in the EU – had now been removed and “the only possible means of securing continued, or restored, EU membership in this context was secession.” Yet even this is proving problematic for the party of government and its leader/First Minister, Nicola Sturgeon.

There was, Blick indicates, a core of 21 per cent of Scottish voters who backed independence in 2014 and EU membership (2016) as against 16 per cent that said no to the EU and yes to the UK – and the 14 per cent that backed independence and Brexit. The most fertile ground should, then, be the 28 per cent who said no to independence but yes to the EU (including this correspondent). It used to be said that the ca’ canny Sturgeon required a consistent 60 per cent support for independence to call for a second referendum; insiders say it is now closer to 80 per cent.

So, what is now in Scotland’s interest?

Economically, this must be – absent full EU membership – as close a relationship to the single market/CU as possible. Just over two years ago, in an October 2016 report for the Scottish parliament’s Culture, Tourism, Europe and External Affairs committee, the respected Fraser of Allander Institute (FAI) suggested that the overall negative impact of Brexit on trade, labour mobility and investment would bring a 2-5 per cent decline in GDP over ten years.

The latest snapshot of Scotland’s export performance (via Export Statistics Scotland 2017) shows a substantial increase in export of goods to the EU which are up 18 per cent. Trade minister Ivan McKee said this underlines “the importance of Scotland staying in the single market and customs union, which is eight times bigger than the UK market alone, because trade with the EU makes up more than half of Scotland’s exports.” Of course, the UK still accounts for some 60 per cent of Scottish exports. But, as the Fraser Allander Institute commented, “trade deals with other countries are possible, but little can match the scale or accessibility of the EU Single Market.”

Similarly, a briefing for the Scottish Parliament (by Tena Prelec) on the impact of Brexit on six key ‘growth’ sectors – food & drink, sustainable tourism, life sciences, creative industries, energy and financial/business services – makes for pretty bleak reading (“significant worries and objective challenges”). It warns: ” Should a ‘no deal’ scenario materialise and WTO tariffs be introduced, most exported products could be significantly hit.” The industries are resilient and are confident they can bounce back, it adds, but uncertainty and the inability to plan ahead “is already causing considerable damage.”

And a separate sectoral impact analysis for the Scottish government says: “Tariffs and non-tariff barriers will clearly make it harder for Scottish businesses to trade with the EU, and will likely reduce the volume of trade. The sectors that appear most vulnerable include food and drink, chemicals, life sciences and other manufacturing sectors. Impacts are likely to be felt quickly, although longer-term there may be opportunities to explore alternative international markets and rebuild domestic supply chains.”

Already, demographically, Brexit is taking its toll, notably in agriculture which is heavily dependent on EU nationals and, moreover, faces what some senior EU officials soberly call “desertification” if the absence of/decline in subsidies and/or grants means farmers have to switch to other activities and do not manage the land (see here and here).

Other sectors that could be damaged by an EU national exodus include higher education. Professor Sir Anton Muscatelli, Principal of Glasgow University, says 950 of his staff are non-UK EU nationals who account for 21 per cent of academic research staff. Universities Scotland say EU-nationals account for 17 per cent of all academic staff. Certainly, they helped attract flows of research grants from EU funding programmes such as Horizon 2020 that are now in serious jeopardy, certainly on the same scale.

As many as 235,000 EU nationals live in Scotland (see here) and they account for most of the recent population increase to 5.4 million. Before that vote for Brexit all of our population growth over the next decade was expected to come from migration, mainly of EU nationals. Muscatelli told a recent Edinburgh rally: “Unless there’s a serious shift we face the real possibility of that increase in population being wiped out: it’s catastrophic for Scotland.”

We also know that EU nationals are more likely than the indigenous population of working age to be in employment: they contribute disproportionately then to the exchequer via their taxes. What’s more, they are vital for a social care sector (and others) already under stress because of an ageing population. Finally, of course, they add to the gaiety of the nation.

There’s plenty more but the Scottish parliament’s Culture, Tourism, Europe and External Affairs committee summed up what’s at stake in a 2017 report: “The UK’s withdrawal from the European Union will be the most significant change to this country for decades. It will fundamentally alter Scotland’s place in the world and impact on the devolved competences of the Scottish Parliament whether that is in terms of the UK’s new relationship with the EU, the repatriation of previously EU competences (for example in agriculture or fisheries) or the process of establishing new free trade agreements with other countries.”

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Sceptical Scot

David Gow is Editor of Sceptical.scot, Senior Adviser at Social Europe, and Senior Adviser at Acumen Public Affairs. He is former European Business Editor of The Guardian and is Advisory Board member of the Scottish Centre on European Relations.