Leaving the single market will require adjustment but talk of an economic “catastrophe” is over the top says Bill Jamieson
Is leaving the EU single market “economically catastrophic” for Scotland? And has a second independence referendum now moved closer?
First Minister Nicola Sturgeon has upped the ante on Scotland’s future, warning Theresa May that her Brexit plan for Britain makes a second independence referendum “all but inevitable”.
She also said leaving the EU single market and customs union threatened to be “economically catastrophic”.
She sounds as if she means it … again. She may well seriously mean it. But how many are still seriously listening? In these pronouncements, the First Minister is in danger of running into a law of diminished credibility: the threat (or promise) made… then qualified… then made again… then modified.
I suspect a public weariness is setting in. And I’m not sure now which would now be worse for the First Minister – that Westminster calls her bluff and agrees to a second referendum – or that her bluff is not called … and the voters stop listening,
There is little public appetite in Scotland for a second referendum. And support for independence has not greatly changed – and may even have slipped a little – from the 2014 referendum.
The danger for Ms Sturgeon is that her office becomes about as riveting as the speaking clock – with the clock stopped. It may not be long before this has a diminished resonance among voters – followed by a switch-off.
The policy calculus may be that the proposed exit from the single market and reliance on a set of bespoke deals to replace the customs union will indeed prove to be as “economically catastrophic” as she believes it will be, and that support for independence will swell as the economy goes into free-fall.
What is truly disheartening about all of this is how our global vision has diminished and our future prosperity now seems to hinge on the EU single market alone – equating UK withdrawal with a total collapse in UK-EU trade.
Whatever has happened to the SNP as a champion of Scottish enterprise and endeavour world-wide? Did not the party’s former justice minister Kenny MacAskill a few years ago co-author an outstanding book entitled Global Scots? Have we forgotten the role that Scottish finance played in the creation of the UK’s world-wide trading and investment empire – a far larger determinant of our economic fortunes than the formal boundaries of empire?
Was it not Scottish finance that drove the expansion of America’s railroads, Scottish engineers who were pivotal in opening up the world’s greatest gold and deep level mining? Scottish entrepreneurs who opened up trade and investment links from Canada to Russia, from South America to Asia Pacific? Whenever did we start to think so small?
It was not Michael Gove but the European Commission Director General for Trade who declared that over the next 10 to 15 years, 90 per cent of world demand will be generated outside Europe.
To speak of single market departure as “catastrophic” is truly stretching it – just as those forecasts of economic doom at the time of the Brexit vote last summer were stretching it.
The economy did not go into a tailspin or plunge into recession. Latest Purchasing Managers Index surveys are buoyant for manufacturing (at a 30-month high), construction (an eight-month high) and services (a 17-month high). Far from consumer retrenchment, retail sales are up 5.9 per cent on a year ago.
Here in Scotland the latest Scottish Chambers of Commerce pointers covering construction, financial and business services, manufacturing, retail, wholesale, and tourism show a positive outlook for key sectors, particularly for manufacturing which reported its strongest trend in new orders since 2014.
Meanwhile major global companies such as Google, Facebook, IBM Ford, Vauxhall and Nissan have either announced or confirmed UK investment plans since the Brexit vote.
And as for the economy overall, annual growth is running at 2.2 per cent, the strongest performance of the world’s advanced economies. If that is “catastrophic”, whatever must success be like?
But “just wait”, we’re now told. Catastrophe lies ahead outside of the single market.
Does it? Scotland’s business and political class may be strongly pro-EU. But our economy does not reflect the degree of integration they imagine: our goods and labour markets are not as closely linked with mainland Europe as the rest of the UK and our exports to the EU are stagnant.
Scotland’s total exports (international and rest of UK) in 2014 were £76 billion. Of this, exports to the EU totalled £11.6 billion, or 15 per cent – and they have been stagnating at around £11 billion since 2002.
Nor, setting aside the UK’s £89.5 billion annual trade deficit, can it be argued that the EU is a compelling growth market for the UK. In 1999 some 61 per cent of UK exports went to the EU. It has fallen to 44 per cent - despite single market membership.
The EU is hardly a growth model for us. While Scotland’s unemployment rate has just clicked up to 5.1 per cent, unemployment across the EU stands at 8.3 per cent, in France 9.7 per cent, in Italy 11.6 per cent and Greece 23.4 per cent. Youth unemployment across the Eurozone stands at almost 20 per cent.
It’s hardly a model we want to emulate, more a disease we don’t want to catch. Yet ‘Remainers’ have consistently failed to recognise the weakness of the EU as an economic model.
But what of EU grants and subsidies that we stand to lose? In the past, Scotland was a net beneficiary of EU largesse. But as Professor David Bell of Stirling University has pointed out, this is no longer the case: we’re a contributor, not a supplicant. Scotland makes a small net contribution of £337 million a year, equivalent to £64 per person per year.
Some in Scotland would prefer a half-way house, similar to Norway, a member of the European Economic Area as a ‘soft Brexit’ compromise. But being in the EEA would require the UK to continue making multi-billion annual payments to the EU. It would also mean remaining under European Court of Justice jurisdiction.
Why should SNP supporters, having rejected in an independence referendum continued Treasury control of Scotland’s budget, not also cavil at a law-making body outwith Scotland? Little wonder an estimated one million SNP supporters voted for ‘Brexit’.
We face an adjustment, certainly, but not a catastrophe. It surely would have been better for Nicola Sturgeon to have stayed her hand and shrewdly waited – and then hit with tangible, deliverable demands for Scottish control over farming and fisheries, together with maximum support for infrastructure and connectivity.
We need to ensure Scotland really is as competitive – in or out of the single market – as we could wish it to be. Latest figures show growth in the Scottish economy in the third quarter of 2016 was just 0.2 per cent – and only 0.7 per cent over the past year compared with UK growth of 2.3 per cent.
Left unattended, it is this that is more likely to prove, in the First Minister’s own vivid word, catastrophic.