Scotland’s Brexit Choices

Dr Kirsty Hughes, Director of the Scottish Centre on European Relations, 17 April:

The Article 50 clock is ticking, but talks are not likely to start until the end of May or early June. The two year deadline to conclude exit talks means, barring a change of heart, the UK will be out of the EU by March 2019 but with most of its future EU-UK trade deal still to negotiate.

First Minister Nicola Sturgeon has asked for a second independence referendum, and a Section 30 order, so that Scottish voters can have a choice on independence or not before the UK finally leaves the EU. Theresa May has said, for now, she won’t go along with that. However this political stand-off develops or is resolved, Scotland will have to make its Brexit choices amidst considerable uncertainty – unless it gets no choice, with May turning ‘no, not now’ into ‘no, never’.

If Sturgeon and May resolved their disagreement so that a second independence referendum could be held by March 2019, what might Scottish voters know by then, and what will still be uncertain?

In-depth, must-read analysis from the recently launched SCER think tank.

Roundup, Sunday 9 April 2017

Noteworthy news, analysis, and commentary from the past week or so…

Standard Life Considering Dublin Hub After Brexit

Bloomberg, 5 April:

Standard Life Plc, which is merging with Aberdeen Asset Management Plc to create an $810 billion giant, is considering making Dublin its new hub inside the European Union as it prepares for the U.K. to lose easy access to the single market, the firm’s chairman said.

Barring “something miraculous” happening, the Edinburgh-based money manager will no longer be able to service its 500,000 Austrian, German and Irish clients from the U.K. after Brexit, Gerry Grimstone said in an interview Tuesday in Delhi. Standard Life is weighing turning its Dublin branch into a subsidiary from which it can “passport” into the rest of the EU, he added.

The firm would then “make the German business a branch of the Irish business,” said Grimstone. “All of us are preparing road maps like” that.

EU lawmakers adopt Brexit resolution, reject pro-Gibraltar hint

Reuters, 5 Apr:

European Union lawmakers adopted a resolution on Wednesday setting their red lines for the two-year divorce talks with Britain and rejected attempts by British MEPs to recognize Gibraltar’s pro-EU stance in the Brexit referendum.

The changes proposed by British Conservative lawmakers in the EU parliament and by a cross-party group of MEPs wanted to highlight that Gibraltar voted against Brexit.

They also wanted to add a reference to the enclave in a paragraph saying that a majority of electors in Scotland and Northern Ireland voted to stay in the EU.

The main groupings in the parliament opposed this change because “we do not agree to give to the Gibraltar issue the same importance as Scotland’s and Northern Ireland’s”, a parliament official said.

Scottish economy contracts by 0.2% in the fourth quarter of 2016

The Scottish Government published some disappointing economic figures1 this morning. From the publication Scotland’s Gross Domestic Product, Quarter 4 2016:

  • In the fourth quarter of 2016 the output of the Scottish economy contracted by 0.2%, after 0.1% growth in 2016 Q3. Equivalent UK growth this quarter was 0.7%.
  • Scottish GDP per person contracted by 0.3% during the fourth quarter of 2016.
  • In the fourth quarter of 2016 output in the services industry in Scotland was flat (0.0% change), while production contracted by 0.9% and construction contracted by 0.8%.
  • Compared to the same period last year (i.e. 2016Q4 vs 2015Q4), the output of the Scottish economy was flat (0.0% change). Equivalent UK growth was 1.9%.
  • Over the calendar year (i.e. 2016 vs 2015) Scottish GDP grew by 0.4%. Equivalent UK growth was 1.8%.

Scottish GDP, quarter-on-quarter and annual percentage change

UK comparison, quarterly growth in GDP

Professor Graeme Roy, director of the Fraser of Allander Institute2:

“With any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s relatively weaker performance can be explained by the outcome of the EU referendum.

“While the downturn in the Oil and Gas sector remains part of the explanation, it is difficult to ignore the substantial declines in construction over the past year (-6.0 per cent) or in Manufacturing (-7.3 per cent)—with all areas of manufacturing, not just those tied to the North Sea supply chain, shrinking during 2016.

“A new concern is the exceptionally weak performance in the all-important Scottish services sector, which saw no growth at all during the final three months of 2016.”

Why the poor performance? Stuart McIntyre, lecturer in economics at the University of Strathclyde, tweeted that weak consumer confidence might be starting to affect real activity, and that investment demand is weak. Angus Armstrong, Director of Macroeconomics at The National Institute of Economic and Social Research, responded to our query on Twitter and suggested that problems in the oil industry were likely a significant factor in causing Scotland’s low output. But he added that the unresolved constitutional question may also be playing a part.

Update, 18:30: The Fraser of Allander Institute has published a blog post summarising today’s figures: 7 Bullet Points on the GDP data released today.

Update, 23:00: Douglas Fraser has posted an excellent article over at the BBC website. He notes that “[t]he numbers for the final quarter of 2016 make it hard to argue that the downturn has been all about the oil and gas slump, because the stalled, becalmed and contracting bits of the economy are much more widely spread.” He cites a number of possible reasons for Scotland’s poor economic performance, including “low business start-up and growth rates, the lack of corporate headquarters in the country, and relatively poor research and development spending by businesses.”

Roundup, Sunday 2 April 2017

Polling

Survation (for the SNP)

Sample Size: 1,014 Scottish residents aged 16+
Method: Telephone
Fieldwork: 28–29 March 2017

Summary | Datasets

Who do you think should have the right to decide if there should be a referendum in Scotland that would allow the people of Scotland to choose between Brexit and Independence? Should it be…

  • The Scottish Parliament: 60.5%
  • The Westminster Parliament: 39.5%

Who do you think should have the right to decide the timing of a referendum in Scotland that would allow the people of Scotland to choose between Brexit and Independence, if it were to happen? Should it be…

  • The Scottish Parliament: 56.4%
  • The Westminster Parliament: 43.6%

Do you think the Westminster Parliament should have the right to block a plan for a referendum in Scotland, even if it is agreed on and voted for by the Scottish Parliament?

  • Yes: 42%
  • No: 58%

News, analysis, and commentary

From Great Britain to Little England?

Michael O’Sullivan and David Skilling, writing today in Project Syndicate:

The upcoming Brexit negotiations will pose a generational challenge for the UK. But, beyond handling those talks well, the UK also needs to develop policies that will enable it to navigate an ever more challenging international environment. This will require it to do things very differently than it has in past decades.

In fact, the UK’s survival could depend on it. Brexit, and UK policymakers’ failure to develop a coherent, robust economic strategy has breathed new life into the Scottish independence movement. Many are confident that the small-economy model would work well for an independent Scotland. To be sure, Scotland has significant economic exposures that it needs to address, and it might need the security of a larger economic unit. But it is not obvious that the UK provides such security, especially now that it is on a path to leave the EU’s single market and customs union.

Independence would allow Scotland to develop policies that are more in line with other successful small economies—not least by retaining EU membership. As Scotland confronts the strategic challenges of Brexit, it will also have an opportunity to develop policies that are better suited to it.

We recommend Dr Skilling’s 2013 paper Centrifugal world: Why the future is small, which describes how “[s]maller countries are likely to be better able to navigate an increasingly complex, turbulent global environment.”

Roundup, Tuesday 28 March 2017

Roundup, Sunday 26 March 2017