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#TradeTuesday: St Andrew’s Day – Would Scottish Independence impact its international trade?

29 November 2022

By Emily Chen

This St Andrew’s Day, the Scottish National Party (SNP) – the ruling party in Scotland – is recovering from last week’s Supreme Court verdict that the Scottish Parliament cannot unilaterally legislate for an independence referendum. The SNP is now turning to Plan B – read more on that here. Should they succeed, however, here’s what it could mean for international trade: 

Despite the ruling that Westminster needs to give permission for a referendum, SNP politicians have presented plans for how international trade would change, if Scotland managed to achieve independence.  

Last month, the Scottish government published their Economic Plan for Scottish independence which foresees Scotland re-joining the EU as an independent member state, subsequently removing border checks on EU imports and exports. The main aim would be to “escape the damage of Brexit and grow our international trade”. However, they would seek to continue to trade with the UK, and introduce measures ‘to smooth any checks required’.  

Those opposed to independence have raised fears that businesses and wealthy individuals would leave Scotland to reduce risk and devaluation. Considering that nearly 60% of Scottish exports go to other parts of the UK, disruption would be expected to be severe.  

As Scotland trades around four times more with the rest of the UK than the EU, trading patterns would need to shift extremely quickly to adapt to an economy geared towards trade with the EU after a Scottish UK exit.  

Research states, it is not just trading patterns which would be impacted, but it’s the economic interdependencies which would deal the real blow to the economy in an independence scenario. The combination of independence and Brexit could reduce income per capita by at least 6%, and the impact of independence would be two to three times greater than that of Brexit, analysis suggests, with the impact of new borders having a large negative effect.  

Available evidence suggests that border costs would increase even if, following independence, Scotland and the rest of the UK maintain a common economic market comparable in scope to the EU’s single market as explained here

The Economic Plan explained Scotland would use the pound sterling for as short ‘as practicable’ before moving to a Scottish pound. Introducing a currency difference may complicate whether the UK will want to trade with Scotland. This illustrates one of the peculiarities of Scotland not being an internationally recognised State, which means an independent Scotland would have gained sovereignty over its internal affairs (such as currency) but the nature of its independence would depend on the negotiated exit terms; similar to the Withdrawal Agreement when the UK left the EU.  

The Scottish economy is generally very similar to the UK economy, and trade statistics have also broadly followed a similar pattern since the pandemic and Brexit. With the volatility energy markets the largest growth in the Scottish economy has been in the oil and gas sector, with other key exports such as food and drink.  

The point has further been made that Scotland will not have WTO-terms to fall back on, making exit negotiations and future trading relations/terms both difficult to predict and (with the UK being the biggest trading partner) inherently unequal.