Monday, March 20, 2017

Scots now weigh economic uncertainty of independence

Scottish National Party (SNP) leader and

Scottish National Party (SNP) leader and Scotland’s First Minister Nicola Sturgeon gestures to the audience after making her closing speech during the Scottish National Party (SNP) Spring Conference in Aberdeen, east of Scotland, on Saturday. PHOTO|AFP 

Aberdeen, United Kingdom. The prospects for Scotland’s economy after Brexit are at the heart of the battle between its pro-independence first minister and British Prime Minister Theresa May, who wants Britain to stay united as it leaves the EU.

Nicola Sturgeon has warned that leaving the bloc’s single market will cause tens of thousands of job losses in Scotland, while May has said she will aim for the “best possible deal” with Brussels -- for Scotland too.

Going it alone raises a host of doubts about Scotland’s economy including what currency it would use and how it could reduce a budget deficit of 9.0 per cent of gross domestic product -- worse than crisis-hit Greece.

But the future of the North Sea oil sector -- centred on the city of Aberdeen, where Sturgeon’s Scottish National Party held its conference this weekend -- is the key concern.

World oil prices have declined in recent years and the offshore stocks are depleting.

Deirdre Michie, head of Oil & Gas UK, the leading association for the North Sea industry, told AFP the sector was going through “quite a sustained downturn”.

The oil industry employs around 330,000 people across the UK, including around 38 per cent based in Scotland -- many of them in Aberdeen.

Aberdeen’s business community is wary about another constitutional confrontation just three years after the last independence referendum in which Scotland voted to remain a part of Britain by 55 per cent.

Sturgeon’s announcement last week of her plans for a referendum generates “continued uncertainty and it’s just a matter of fact that business doesn’t like uncertainty,” said James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce.

But Bream said he was not surprised by the announcement since “the argument about independence has never gone away” despite the result of the 2014 plebiscite.

The unionist campaign in that vote was heavily focussed on the economic benefits of being a part of the United Kingdom. The argument emphasised the “broad shoulders” of the union, which can cushion Scotland from shocks such as a financial crisis or oil price crash, as well as raising doubts about Scotland’s ability to manage on its own.

As Scots face up to the prospect of a new referendum -- the arguments on both sides are being rehearsed.

Sturgeon has said she wants to prevent Scotland, which voted strongly to remain in the European Union in last year’s Brexit vote, being “dragged out” against its will.

She is widely expected to get the Scottish parliament’s support for her quest in a vote on Wednesday but still needs the agreement of the British government to proceed.

Alex Kemp, head of the Aberdeen Centre for Research in Energy Economics and Finance, said Scotland “comes out quite well” in economic comparisons to European Union countries, particularly to poorer Eastern Europe.

Scotland’s gross domestic product per capita of $41,239 (38,360 euros) is roughly equivalent to that of Belgium or Finland, and higher than the British average, according to data reported on the Scottish government’s website earlier this month.

The comparison members of the world’s leading economies group, the Organisation for Economic Co-operation and Development, took into account “a geographic share of offshore oil and gas output” for Scotland.

But the data is from 2014 statistics and in many ways Scotland is now in a worse position. (AFP)