Buoyant Scotland: Drowning UK?

This same week that Nocola Sturgeon agreed with the EU that the UK was running out of time to avoid a disastrous Brexit, the Sustainable Growth Commission (SGC) published their report on Scotlamd’s economic future. As compared to the argument made four years ago in the run-up to the referendum of September 2014, this 354-page  analysis is  more hard-headed and plausible: it makes no assumptions about oil revenues propping up the economy; it assumes we would keep the £ for a decade. Commission chair Andrew Wilson pin its introduction said:

(A) prospectus that recognises the transitions that are required between the
inherited starting point and the creation of the sort of country we seek to be. A clear sighted and honest exposition of how to make this transition orderly is the very least that should be expected by those we seek to convince.

A noble ambition that the subsequent pages try to fulfill. Immediately, unionists of all parties sought to discredit the arguments deployed, with Brexiteers managing to keep a straight face arguing against the same principles of sovereignty argued here that they themselves deploy endlessly to justify the UK leaving the EU.

Tories in particular argue that Scotland, despite its overwhelming 62% vote to remain in the EU, would be best off in Britain and out of the EU because 60% of its trade is with the former and only 16% with the rest of the UK (rUK). Their argument is we will all benefit being out of the EU. But let’s  let’s examine that trade more closely. Britain’s five biggest trading partners are shown in Fig. 1.

UktradeTop5Figure 1: UK Annual Trade in £bn with Top 5 Partners (Source HMRC)

So, it’s not just Scotland; 60% of the entire UK;s trade is with  the EU, qith whom it runs an unhealthy trade deficit of 114% with the biggest three. In contrast, of all  UK ‘regions’, Scotland runs the healthiest overseas trade surplus, as shown in Figure 2. Note that the the UK trade deficit is concentrated in the ‘economic powerhouse’ of  Southeast England.

 Figure 2: UK Regional Overseas Trade Balance (Source:HMRC)

It would appear that in the other 40% of Scotland trade that is not with UK, it does very well—much better than the import-addicted Southeast. At $.8bn, the USA is Scotland’s top international export destination. Together with Netherlands, France, Germany and Norway, it accounted for £12.1 billion (41%) of international exports from Scotland. Excluding oil and gas, the food, drink and tobacco sector (£8.9bn), the financial services (£8.6bn) and the wholesale sector (£8.35bn)

Turning to that 60% of trade Sotland enjoys across our tariff-free border with rUK. The £46.6bn in exports do not quite match £51.1bn in imports. But a 10% trade deficit is so much healthier than the 114% that the UK runs with its main EU trading partners (Fig 1),. The argument from Brexiteers that that the EU will be forced to keep any tariffs low to avoid damaging their best export markets must also apply to the English border.

Although the SGS follows UK government practice of excluding oil and gas revenues from Scotland’s figures, any balanced discussion about Scottish trade must take this major sector into account. In 2014, plunging oil prices undermined economic arguments for independence. The knock-on effect also hit the services Industry, especially around Aberdeen, further curtailing growth in the Scottish economy.

Today, the reverse applies. Oil prices are above $75, North Sea production is rising–and the service industry with it. Scotland consumes a small fraction of oil and gas it produces. Last year, Scottish oil and gas exports added £17.5bn to exports, giving the country almost £100 billion in total exports and a healthy trade surplus.

However persuasive this Report from the SGS may, unionists are already losing the economic argument for Scotland to remain in the UK on the basis of trade alone. On the global ocean of trade, Scotland is buoyant, while England is drowning. Our partnership with England may have once been glorious—and profitable for both. But since Little Englander Brexiteers threw their partnership toys out of the pram, there is no sensible reason left why Scotland should still cling to a drowning partner, especially with a current trade balance shown in Figure 3.


Figure 3—Scotland’s Trade Balance 2016
 By rejecting the EU, our English cousins have left us no sensible choice but independence. We have little to lose and much to gain by staying the pragmatists for which we Scots are famous

“The EU market is eight times the size of the UK market”, highlighting the immense potential for Scotland’s exports, but at the same time, the importance of staying in the single market.

—Keith Brown MSP, Cabinet Secretary for the Economy, Jobs and Fair Work

About davidsberry

Local ex-councillor, tour guide and database designer. Keen on wildlife, history, boats and music. Retired in 2017.
This entry was posted in Commerce, Politics and tagged . Bookmark the permalink.

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