Gareth Williams: EU offers better chance for strong Scots economy

Survey shows EU-funded research has a greater impact than work funded nationally. Picture: Matej Kastelic

The Scottish economy has traded with Europe for centuries. Economic, social and cultural progress has advanced with the exchange of goods, ideas and people through the Renaissance, Enlightenment and Industrial Revolution to the present day.

The risk of significant destabilisation of the economy if the UK votes to leave the European Union (EU) has been identified by the Bank of England and others with responsibilities for independent, evidence-based forecasts, and is an important consideration.

However, this decision is about our long-term future. The key question has to be “does being in or out of EU membership offer a stronger basis for Scottish and UK growth and prosperity?”

Whatever the result, the European economy will always be vital for Scotland. But the decision is between fundamentally different relationships which must lead to very different outcomes.

There is no way of knowing what these outcomes would be. Many Scottish Council for Development & Industry (SCDI) members have raised the need for non-partisan evidence on the potential impact of either decision so SCDI is facilitating open and informative discussion.

However, SCDI’s membership – because it includes the private, public and social economy sectors and every geography of Scotland’s economy – is a useful barometer for these future outcomes. Over the past year SCDI has, therefore, engaged our members in extensive discussions and surveys on the EU.

This consultation has demonstrated that, while there are views to the contrary, there is clear support from a majority of SCDI members stating a position for the UK to remain in the EU.

The key challenges for the Scottish economy, as identified in SCDI’s recently published policy blueprint From Fragile to Agile, are increasing productivity, innovation and internationalisation, underpinned by improving infrastructure, with high priorities of digitalisation and the low carbon transition. Our membership of the EU makes a substantial difference to action in all of these areas.

The EU is the world’s largest single market, enabling the free movement of goods, capital, services and people, reducing regulatory barriers and developing common standards.

Dependent on trade with EU countries are 46 per cent of Scotland’s international exports and an estimated 336,000 jobs across Scotland.

Linked with the single market, the EU has agreed common social protections in the workplace including rights for women, part-time employees, working parents and health and safety.

People from the EU supply key skills and, following decades of slow decline, have helped the Scottish population grow over the past ten years. With 84 per cent of working age, compared to 66 per cent of the Scots-born population, they make a significant net contribution to the economy.

EU students at Scotland’s world-class educational institutions have increased by 25 per cent in the past five years. With nearly half of Scottish businesses in a SCDI survey saying that a lack of young people with “global skills” may constrain on their international business plans, attracting EU students and retaining them in our labour market benefits the Scottish economy.

Europe invests significantly in research and innovation in Scotland, including £1 in every £10 of higher education research funding and contributions to projects such as Strathclyde University’s Technology Innovation Centre. It encourages multinational collaboration by businesses and education in the EU, and the evidence is that this has greater impact than national research.

The EU is now the most highly influential player in international trade and it has removed many trade barriers and defended trade interests for key sectors of the Scottish economy. Recent deals with Canada, Colombia, and Viet Nam include important benefits for the Scotch whisky industry.

In 2014 visitors from the EU accounted for just over 54 per cent of overseas visitors to Scotland. The EU’s “Open Skies” aviation agreement has helped develop services to bring them here.

The EU has supported many improvements to Scotland’s surface infrastructure. In the first ten years of its regional policy, Scotland was the third highest recipient of funding, with about two-thirds for infrastructure projects, such as road and ferry links in the Highlands and Islands.

EU funding is contributing to the rollout of superfast broadband with a focus on SMEs. Its climate change and renewable energy leadership, targets and funding have supported the growth of our renewables industry. It has also introduced important environmental protections.

So the EU is clearly contributing to productivity, innovation and internationalisation in Scotland. But, of course, the EU is far from perfect. Discussions with SCDI members found areas where there is support for reform and greater focus. Some identified a deepening of the single market and action to address barriers to trade, while others are concerned by EU regulations.

The EU has to be more open and accessible.

We also need to analyse the alternative with evidence from experience and from non-EU countries.

An argument is made that if the UK leaves it would negotiate free access to the Single market, while becoming exempt from the free movement of labour and common regulations. The UK was unable to secure such an agreement prior to its entry. We would not know, probably for several years, if it would have more success after leaving the EU. But existing deals suggest that free access for services (75 per cent of the Scottish economy) on these terms will be very difficult.

Non-tariff barriers to trade would increase. The UK would make regulatory decisions, but divergences with the EU would increase the complexity for companies complying with both. Border checks would add delays in an era of just-in-time delivery and integrated supply chains.

Trade with the Commonwealth was the alternative to joining the EEC and it is said that trade with Commonwealth countries offer better opportunities for growth.

But there is no reason why EU membership should be barrier to these links – indeed, the EU has, is negotiating, or is planning free trade agreements with 90 per cent of Commonwealth countries.

Energetic engagement and influence by Scotland and the UK in the EU and, with EU partners, globally can develop a positive agenda and should, in SCDI’s view, be part of a common platform to grow Scotland’s economy though productivity, innovation and internationalisation.

The new EU Urban Agenda recognises that cities are the source of and solution to many challenges. The Scottish Cities Alliance is strengthening links across the EU and there are major opportunities in EU funding for projects, including smart cities, low carbon and housing.

With partners, SCDI has recently published a report on how utilisation of digital technologies can drive productivity. The development of an EU digital single market can link-up national initiatives on industry and public services, increasing opportunities for Scotland’s tech sector.

A circular economy reuses items and recycles materials to live within environmental limits and turn waste into wealth, and EU funding is to be invested in innovative SMEs through Scotland’s Circular Economy Investment Fund. The Energy Union, to interconnect EU energy markets, will increase security of supply and further enable the low carbon transition in Scotland.

Increasing trade is a key to higher productivity in Scotland. It is estimated that the EU-USA Transatlantic Trade & Investment Partnership in negotiation will generate economic benefits to the UK of £4-10bn per year and increase both Scotland’s GDP and international exports. While the challenges might be greater, the higher economic returns from removing barriers to emerging markets should also be a priority.

The EU’s role in European peace and prosperity over the last 70 years should never be underestimated. For Scotland, we gain value and strength – economically, socially, environmentally and culturally.

Whether the UK remains in or leaves the EU is a decision that individuals across the country will determine. Having listened carefully to the views of our members, SCDI has stated our position that we support the UK remaining in the EU to inform the debate. As the global economy becomes more competitive and connectivity improves, we believe that influence in and from within the EU will offer stronger prospects for the Scottish economy.

• Gareth Williams is head of policy at the SCDI (Scottish Council for Development & Industry)

FACT BOX

• 46 per cent of Scotland’s international exports and 336,000 jobs in Scotland depend on trade with the EU.

• 84 per cent of people from the EU in Scotland are of working age, compared to 66 per cent of Scots-born.

• EU students at Scotland’s educational institutions have increased by 25 per cent in five years.

• Europe invests £1 in every £10 of Scottish higher education research funding.

• The EU is the most influential player in global trade discussions, supporting key sectors of the Scottish economy.

• EU funds projects in Scotland – £15m for smart cities and £18m for the circular economy.