Two years after Brexit was “done”, several major loose ends remain untied, resulting in repercussions for which adequate adjustments have yet to be made. Among these are the Northern Ireland protocol, a final trade agreement, additional documentation restricting trade (especially exports) and the labour shortages caused by removal of many EU workers.
Despite having voted convincingly by 63% to 37% to remain, Brexit has hit Scotland particularly hard. Strong support for the EU in Scotland persisted throughout the Brexit process and continues to this day, and a large majority of the Scottish Parliament opposed Brexit to the very end.
But new barriers to Europe erected by Brexit do not mean that Scotland must follow the seemingly antagonistic approach adopted by our English neighbours. Scots once enjoyed close links with Europe. Throughout the Middle Ages, trade with the Hanseatic Ports and the Low Countries far outweighed that with England. When focus switched to further afield after Union, the Scots seized those new opportunities offered by empire. From the Hudson’s Bay Company to HSBC and Jardine Matheson to Lachlan MacQuarrie turning a penal gulag into a prosperous colony, the Scots were innovative and imaginative partners.
However, the growth of superpowers and economic “tigers” means the world does not offer the same scope for global exploitation as when Britain’s technology “edge” was sharpened by gunboats and Gatling guns. English attitudes toward Europe narrowed Scotland’s economic view there. Brexit may allow England to seek restoration of lost global trade. But tariff barriers and diplomatic fences to mend with close neighbours should not blind Scotland to opportunities right on our doorstep.
To exploit these, Scotland must cope with today’s greater structural limitations on any interaction with the EU. Until Brexit, the Scottish Government interacted directly with EU institutions. For this to continue, flying the European flag is neither a robust policy on EU affairs, nor a strategy to exploit opportunities unique to Scotland.
Scottish media coverage of European politics beyond Brexit and independence is rare. Readers can have little idea that a new German coalition government had taken office, or that French president Emmanuel Macron has set out a vision for France’s EU Council presidency – let alone what those developments might mean for Scotland.
The Scottish Government has a clear pro-EU stance; its aspiration is to become an EU member. Procedural hurdles mitigate against this being achieved during the 2020’s. But there are short-term opportunities to forge relationships with the EU while still within the UK. Trade and co-operation initiatives would build on Scotland’s favourable image within the EU. Growing Scottish direct trade with the EU is one that unionist parties could hardly find objectionable and may be persuaded to support.
Currently Scotland exports £87.1 bn total in trade. Of this, £57.0 bn goes to rUK. Of the balance, £16.4 bn is with EU countries and the £18.7 bn remaining with the rest of the world. Since Northern Ireland is part of the EU for trade purposes and the Irish government treats it as non-foreign, the £2.1 bn that Scotland exports there should be added to the EU total, giving a balance of £18.5 bn (21%) to EU, £54.9 bn (63%) to England and Wales and £16.5 bn (16%) to RoW..
A pro-active strategy to minimise the effects of Brexit should be to forge a substantive profile for Scotland within the EU. This would build connections and influence in Brussels to smooth later passage to membership. At the same time, by raising Scotland’s international profile and increasing its prosperity would demonstrate competence that might sway the many doubters clinging to the Union in fear for their economic well-being, rather than residual loyalty.
As things stand, the Scottish Government will have its work cut out to sustain, let alone enhance, its EU connections and influence in Brussels. As part of a third country, Scotland has become a peripheral actor in Europe. Clear priorities are needed for Scotland’s relationship with the EU to flourish. This requires substantial investment in EU affairs, plus “Europeanised” politics. This would best be achieved through cross-party consensus and a more informed media.
Scotland, as Europe’s leading renewable energy hub, is its key to a green future. We are home to the largest tidal power project in Europe and account for a massive 25% of all of Europe’s wind and tidal resource. The Orkney Islands are not just home to the European Marine Energy Centre but offer, in Scapa Flow, a major trans-shipment hub (outlined in Scotland 2070) to rival Singapore, once the melting of Arctic sea ice permits 5,000-mile shorter sea passage to East Asia for Cape-sized ships.
In more intangible terms, the offer of a skilled and educated English-speaking workforce, with world-class offerings in marine engineering, biotech and quality food and drink offer opportunities to build links by growing business ties.
While it is geographically at the periphery, this offers certain advantages, such as the Orkney entrepot mentioned above and strategic bases to complement NATO allies. But the key aspect to be exploited this decade are the historic but rather neglected links with our neighbours outside the UK. Two examples are cited below.
The overall strategy should be to forge links with Northern European neighbours, with whom we already have much in common. They are likely to look favourably towards us as a similar small, prosperous country to help counterbalance the culturally different Mediterranean members.
Denmark As Partner
About the same population as Scotland, Denmark is an open, wealthy, educated economy. Scottish Development International already has an office in Copenhagen. It is one of the Nordic and Baltic eight, rankung as 3rd-easiest country in which to do business (source: World Bank). The IMF ranks it as the 9th highest GDP per capita in the world (£43,690), this having grown at 3.1% annually between 2004 and 2017. Exports make up 55% of GDP and trade with other countries is worth £121.7 bn.
However, while Denmark may be Scotland’s eighth-largest export market, but that £875 million total represents just 2.7% of all Scotland’s international exports. In fact, Scottish exports to Denmark have decreased by 30.8% since 2013, implying much ground to be made up. Major opportunities exist in construction, engineering, ICT and transport, which includes one of the largest rail innovation projects in Europe running until 2025.
Suggestion Scotland’s dominance in natural energy and marine engineering, combined with Denmark’s Vestas (the global leader in building wind turbines, with 61 GW installed last year—a 22% p.a. growth), suggests co-operation to exploit the market for mutual benefit. Scotland still has much unexploited wind energy, not least offshore, while its lead in tidal would benefit the Danes in harnessing the tides passing through the Great Belt’s entrances to the Baltic.
Ireland As Partner
Again comparable in population, Ireland is Scotland’s closest International trading partner and 5th largest export market, with exports worth £1,470 million going to Ireland. As argued above, this should have NI export added to the total, to gives £2.6 bn total exports. It is now one of the most developed OECD economies, with a GDP per capita of £53,837, caused by an impressive annual growth rate of 13.1% 2005-17.
Ireland is an ideal first step market for Scottish companies. Top sectors in Ireland include food & drink, ICT & business services and renewable energy. There are export opportunities particularly in food & drink, construction, life sciences and energy.
Because Ireland has used low corporation tax to attract overseas investment that wants to locate in the EU to come there, there is little sense in Scotland competing with them in this regard.
Unlike the UK, which sold them off, the Irish government was shrewd enough to retain ownership of its main airports and invest in them to promote ease of access to and from the country. As a result Dublin airport is modern and expansive, putting all Scottish airports to shame. Compared to the handful available from Scottish airports, Dublin offers ten services to North America, as well as the facility to clear US customs before boarding. Being 400 miles closer than chaotic Heathrow, all flight times from Dublin are shorter by an hour.
Suggestion: By an arrangement with Ireland similar to the Scandinavia countries joint use of Copenhagen as their sole North America hub, Scotland could encourage North America-bound passengers to use Dublin superior facilities and connections for transatlantic flights, thereby offering a bargaining chip for trade negotiations.
If Scotland is to become a full member of the world’s nations, its government must behave as if this were already true to make it credib;le.