The Reeling Scottish Economy

Officially, the Scottish economy is still considered a part of the United Kingdom. It is for this reason that the dire state of their economy has not been known to the world as a whole. If we consider the case of Scotland as an independent country, their economic fundamentals are already horrific and are deteriorating by the day.

Being a part of Britain has turned out to be both a boon as well as a bane. It is allowing the underlying conditions to go undetected preventing a full-blown crisis. However, since the fundamentals are getting worse by the day so is the economic reality.

The European Union is known to be a highly indebted economic area. Tragic cases like Greece are also found in the EU. However, the case of Scotland is even worse. Studies show that Scotland has the highest debt in one of the most indebted regions of the world i.e. the European Union! It could be amongst the most indebted nations in the entire world. With this backdrop, some leaders in Scotland are demanding a Scottish independence.

Oil Prices Crash

The economy of Scotland was largely dependent on their share of revenues from oil exploration in the North Sea. However, the prices of oil have taken a nosedive and so have the Scottish revenues. Revenues of $1.6 billion were expected in 2016. However, the actual revenues were closer to $600 million i.e. less than 40% of the projection.

Nicola Sturgeon was basing her campaign for Scottish independence on the oil prices. Her lowest calculations proved that Scotland could survive without Britain if oil fell to $115 a barrel. This statement was made in 2013. Today, the price of oil has fallen down to less than $50 per barrel and a recovery does not seem to be in sight. This makes the possibility of an independent British economy all the more distant. The rise of oil prices can be ruled out in short to medium run given the high output as a result of newer technologies like hydraulic fracturing i.e. fracking.

Bad Precedent Set by Brexit

Many political analysts believe that Nicola Sturgeon’s statements are not intended actually to gain Scottish independence. The economics and mathematics of the issue are such that pushing for independence now would be foolhardy for the Scottish people. The leader is just using this as a veiled threat. The idea is to get more autonomy from Britain. However, a direct request at more economy would be shot down by the British Parliament.

Instead, if the idea of a Scottish exit is used to scare people already afraid of the Brexit results, the British government may be willing to negotiate. Hence Nicola Sturgeon’s financial suicide plan may actually be a political masterpiece. However, the reality of the numbers is so grave that it is unlikely that Nicola Sturgeon will be able to stir up any movement at all.

The Scottish people are also aware that their economic survival will be threatened if the exit the United Kingdom. Hence, they would be reluctant to rally behind their leader and give her the bargaining power that she needs to beat Britain into submission.

British Single Market vs. EU Single Market

The logic provided by Nicola Sturgeon states that Scotland wants to exit the UK because of the Brexit. Britain now has a hard border with the EU nations. It no longer has free access to the European markets. British goods and people will now be considered as foreign and will have to pay applicable taxes.

As a result, Scottish exports have been negatively impacted. To get the economy back in order, Scotland wants to exit the United Kingdom and join the European Union. This would have been a formidable plan had the oil prices not crashed. The oil starved the European Union would be more than happy to remove any levy of taxes. This would give the Scottish economy the boost it needs. Now, with the oil prices tumbling, Scottish industries may need external support. The European Union already has too many issues to deal with and would not be willing to support another economic casualty.

Businesses Looking Elsewhere

The worst part of Brexit is that businesses have left Britain. London may seem to be the financial capital of the world for now. However, that situation is unlikely to prevail for very long. Financial services behemoths, as well as other European multi-nationals, will now have to exit Britain and Scotland creating an unemployment problem that will rock the nation unless local industry picks up.

Businesses want a stable environment in which they can thrive. That is not the environment present in Scotland as of now. With an independence struggle brewing, Scotland is viewed as being increasingly unstable. Added to the Brexit, this spells doom for the local Scottish industry.

This political movement may end up being an economic disaster. Scottish leadership does not have enough power to create pressure on the British people. On the other hand, scared investors are willing to flee at the slightest sight of unrest. The result of a prolonged struggle would be very little political gain and rising economic losses! Maybe the Scottish would be better off resuming their struggle only with the next economic boom.

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