Series – Brexit’s Impact on Scotland: A More Innovative and Global Scotland?

Alison Hunter and Fabian Zuleeg | 27 November 2017

Falkirk Wheel, Kevin Walsh, CC-BY-2.0

Scotland is a nation which has been shaped for centuries by its international outlook. This has also been a critical feature of Scotland’s innovation successes in recent years. International partnership efforts underpin the country’s desire to improve its economic dynamism, ensuring that Scotland’s innovation ambitions are not constrained by size or geography.

EU added value

In recent years, EU policies, programmes, projects and funding have been a critical component of Scotland’s internationally-driven innovation agenda. It is difficult to point to any of Scotland’s key innovation-oriented assets and activities without finding the EU ‘blueprint’ which underpins these. This includes for example large-scale investments such as the University of the Highlands and Islands (jointly-funded through EU Structural Funds), the Scottish Investment Bank and the European Marine Energy Centre, based in Orkney. Furthermore, Scotland continues to perform very strongly in the EU’s ‘framework programme’ for research and innovation. At the mid-point of the current funding programme, Scottish organisations, predominantly led by the higher education sector, secured over €350 million, around 10.8% of total funding awarded to the UK.

Without EU policy and funding, these core features of Scotland’s innovation ecosystem would – in all likelihood – not exist either at all or in their current stage of development. But EU engagement has not been a one-way street. Scotland is frequently showcased by EU institutions as a strong EU partner with highly visible and effective engagement in a wide range of EU scientific, academic, business and innovation-focused projects, networks and platforms. In short, Scotland’s innovation ambitions and international profile are currently inextricably linked to its EU membership and engagement.

While Scotland’s innovation story offers a rich example of EU added value, there is much still to do. Innovation activities have too frequently failed to convert to higher levels of economic performance. There remains a clear gap between Scotland’s scientific and research success and translation to industrial innovation. This is a common story across many EU territories and addressing this will be central in the post-2020 programming cycle. But Scotland is unlikely to benefit from this new wave of EU ideas and initiatives, despite close alignment of respective priorities. This includes an EU agenda to accelerate productivity through support for industry in the areas of digitilisation, decarbonisation and advanced technologies.

From collaboration to competition

Post-Brexit, the UK’s status as an EU innovation collaborator will change to competitor. This includes Scotland. This is already happening, as EU players are forced to re-think the new dynamics which will underpin the EU’s future competitiveness. In areas such as e-mobility, the UK’s contribution to early stage EU-wide strategic planning for the post-2020 period is already being sidelined. This is the tip of the iceberg. The EU’s future growth agenda will gather pace and momentum and there will be no special consideration for those whose future lies outside the EU. In the post-Brexit era, the EU will be in the opposite corner from the UK, instead of being on the same team.

In addition, the UK innovation landscape is less adapted to Scotland’s needs. It is highly unlikely that the UK’s future innovation activities will build on Scotland’s existing expertise of collaboration EU partnerships. The UK government has shown limited interest in EU policy which supports regional innovation, and where Scotland has a strong profile and has made significant investments. While devolved powers for innovation policy and delivery have created conditions for Scotland to pursue distinctive innovation activities and investments which align to its economic structure and innovation objectives, this has been underpinned by its linkages with EU policy and practice. Scotland frequently pursues EU innovation-oriented initiatives with very limited or no other UK participation or interest.

Many ties with existing partners of choice, both in and beyond the EU will be severed. Scotland’s historical participation in innovation partnerships has been both heavily influenced by and, in many cases, dependent on its EU status. Future incentives for EU partners to work with Scotland will inevitably reduce, given that new barriers will emerge, whether bureaucratic- or competition-based. The uncertainly concerning the future status of existing innovation collaborations is already an enormous opportunity cost. The goodwill extended to Scotland over the last eighteen months is not sustainable. EU innovation projects – and the partnerships which drive their direction and future ambitions – are not able (or willing) to extend an indefinite grace period to Scotland.

A global Scotland in a global Britain?

Will this be compensated by the ‘global Britain’ innovation landscape, if this is indeed the direction of UK policy? This is unlikely. Global access is more effectively facilitated through the EU, given its size and successes in economic diplomacy. The narrower parameters of the UK innovation space will, most likely, curtail Scotland’s innovation ambition and performance. There will inevitably be divergence from the EU-driven innovation framework and from the standards crucial for market access for new products and services. Markets drive innovation. By being forced to forego full access and participation in the single market, Scotland will inevitably have less demand-driven impetus for innovation.

In the longer term, the UK’s economy and its innovation performance will lose momentum and dynamism, in particular due to reduced migration. The world’s most innovative locations attract global talent. A recent report noted the contribution of EU migrants to the Scottish economy as £4.2 billion but many are already leaving a space which was once called home and now feels much less attractive. The loss of the skills and expertise underpinning this figure, as well as the investment which derives from it, will have a devastating impact upon Scotland’s innovation trajectory and economic dynamism. Perhaps even more significantly, the loss across a whole spectrum of talent would leave huge gaps in Scotland’s cultural identity.

Dampening Scotland’s innovation performance

Scotland is now faced with an unwelcome and diverging fork on the road to an innovation-driven future. There are many voices arguing for Scotland to vehemently oppose any threat to, or divergence from, its relationship with the EU innovation landscape and EU markets. EU membership facilitated a baseline where innovation partnerships developed and flourished based on mutual goals, interests and a shared ambition for the longer-term direction of travel, within the EU project. Brexit implies, at best, a weakening and, at worst, a severing of these ties without sufficient compensation (if any) arising from a more innovation-driven UK. Rather the opposite: Brexit implies closing borders, closing markets and closing minds. For Scotland it remains a losing proposition.

Alison HunterAlison Hunter | Twitter

Economic and Public Policy Consultancy

Alison Hunter is director and joint owner of the Economic and Public Policy Consultancy, a Brussels-based business. Her areas of expertise include EU regional policy, economic development and growth policy. She is also senior adviser to the European Policy Centre.

Fabian ZuleegFabian Zuleeg | Twitter

European Policy Centre

Dr Fabian Zuleeg is Chief Executive and Chief Economist of the European Policy Centre. He is also Honorary Fellow of the Edinburgh Europa Institute and Advisory Board Member of the Scottish Centre on European Relations.