International Business and Technology Blog

On Friday the 19th September 2014, as a warming sun rose on the coastline of bonnie eastern Scotland, the overwhelming “Nay” to Independence was clear. Those Scottish National Party (SNP) Braveheart Mel Gibson lookalike warriors wrapped in their Saltires, drifted despondently home. The “Better Together” campaign to keep Scotland within the United Kingdom had resoundingly won the night. Of the 4.3 million Scots who were eligible to vote (population 5.4 million), a drum thumping 85% did so. However, the hitherto silent 2 million (55%) demanded No to Independence, while the Independence cries of the very vocal proved thin at the ballot box with just 45%. The points of note to the Scottish Independence election of 2014, include: i) the huge level of political  engagement, ii) the resounding “No”, nowhere more so than in the capital Edinburgh (62%) and iii) 72% of the 16-18 years old voted Yes. The sun was not much higher over London, when Prime Minister Cameron commented how very pleased he was with the result (but, ”it should never have been that close…”), announcing that the Scots will get more devolved autonomy and so would the Welsh, those in Northern Ireland and, of course, the English. In Europe, there was an almost audible sigh of relief as Brussels learned that they would not have to add Scotland’s new candidate membership to their agenda and many EU capitals hoped would be a lesson for their recalcitrant regions. Nevertheless, that Independence cat is now out of the proverbial bag for both the United Kingdom and Europe.

The United Kingdom can look to a more politically devolved union, but business and economics will have their say. Industry came out unreservedly against Independence, declaring a calamity of unknowns would bring “currency risk, higher prices and unemployment”. Scottish based companies both large and small stated they were making plans to move their business south of the border, to England. In the aftermath, the restored certainty in the UK economy was immediately evidenced by a rise in sterling against both the US$ and the €, there was no capital flight from Scotland, but rather talks of pent up demand being released. So why does Scotland find it so hard to leave, and where is it within the United Kingdom? The answer is economics: it makes just 8% in terms of UK’s GDP (110 Bn out of 1345 Bn ), population (5.4 million citizens, out of 64.2 million) and in most other economic indicators. Scotland is a very open economy; trade with the rest of the UK represents almost 70% of its output and importantly > 1.5 million jobs (58%, out of 2.6 million) are directly or indirectly linked to the UK, UK owned firms operating establishments in Scotland, UK public sector, UK grant support, UK government and purchasing contracts, and exports to the UK.

Europe is a Union of 28 countries, most of them small, even tiny in terms of GDP and population, please see table below. Scotland would have been an almost mid-ranking #11 in terms of GDP and population size, well ahead of the likes of tiny Malta, Cyprus, Estonia, and up there with dynamic Ireland, but poorer per capita than similarly peopled Denmark and Finland. But the concern is the Europe’s regions, demanding independence. The Brussels based European Free Alliance claims that there are 40 such regions. For France there is Corsica, Spain deals with Catalonia and the Basques, Belgium risks splitting into Flanders and Wallonia and so it goes on. The precedent set by Scotland is for a status quo, business as usual, but with a gradual regionalization, even as some would argue a “balkanization”, as greater political and with it economic power is devolved. So Mel Gibson and those younger voters will win, eventually, the European regional day!

Interested in the UK economy? Read more in our ebook Exporters guide to the UK!

If you want the details on the http://scotlandreferendum.info/

Sources:

Eurostat GDP http://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tec00001&language=en

Eurostat population: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tps00001&plugin=1