Balance debate

Gail Finlayson (Letters, 8 March) is quite right to raise questions about the balance of payments of the rest of the UK (rUK) and Scotland if there is a Yes vote in September. However, she is quite wrong to say there has been no serious questioning of this issue. Nor are the concerns anything as bad as she thinks.

The facts and figures were examined last year by Professor Brian Ashcroft of the Fraser of Allander Institute at the University of Strathclyde.

Some people do argue that rUK would suffer without oil and gas exports from Scotland. But this argument makes some elementary mistakes.

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First of all, rUK’s balance of payments would benefit as it runs a large surplus on its trade in goods and services with Scotland – its exports of cars and pharmaceuticals, for example.

Secondly, the balance of payments includes not only trade in goods and services but also the profits from “foreign” businesses which are sent to their overseas owners.

About 20 per cent of Scottish gross value added is produced by companies headquartered or registered in the rest of the UK – this figure could rise, of course, if more firms move their headquarters from Scotland to England.

Professor Ashcroft concluded that the impact on the rUK balance of payments would be about £3-4 billion, not £40bn as some argue – very small in the context of an economy which is £1,500bn in size.

A sterling crisis is highly unlikely on that basis; indeed, it is interesting that, as the referendum approaches, the financial markets currently favour sterling, which is rising, not falling, against other major currencies.

Brendan Corkery

Trinity

Edinburgh