Should I Stay or Should I Go?

By Drew Hargrove

In the fall of 2014, Scotland had finally resolved the issue of independence: Much to William Wallace’s chagrin, the Scottish public voted in favor staying with England as a part of the United Kingdom and, more importantly, the European Union. Enter Brexit. The same battle that Scotland fought less than two years ago resulted in a different outcome this past June, as the UK referendum approved UK’s withdrawal from the European Union. Just as in 2014, Scotland is, yet again, facing another independence question: To stay with the United Kingdom? Or to join the EU? Whichever path Scotland chooses, hard times lie ahead.

Should Scotland vote for independence, leave the UK, and rejoin the EU, there are several issues for Scotland to consider. One of these issues is costs, and with these costs there are two main factors to consider.[1] First, Scotland exports exponentially more to the rest of the UK (£46 billion) than it does to the rest of the EU (£12.9 billion).[2] Should Scotland leave the UK, it will face potential barriers such as “tariffs on cross border trade in goods and services, exclusion from the UK single market, discriminatory procurement rules, diverging regulatory rules in financial services and other sectors, and barriers to cross border investment including mergers.”

Second, in addition to cost of losing the UK as a relatively cheap trading partner, there will be additional costs in joining and staying a member of the European Union; namely, Scotland and the EU would have to negotiate a plan to coordinate currency.[3] Scotland leaving the UK might mean that Scotland would leave the pound sterling (as used in the rUK) to go to the Euro. In accordance with the aforementioned trading dilemma, a difference in currency between Scotland and the rest of the UK would be yet another barrier in trade. It is worth noting that the current lender of last resort for Scotland is the Bank of England. Unless Scotland stays (or is even allowed to stay) with the pound sterling, the Scottish Central Bank would have to take on this role. The effects of this, of course, are unknown, but they are definitely factors to consider.

Costs aside, there is still a process to follow should Scotland choose to leave the UK. The Scottish referendum in 2014 was governed by the appropriately-titled Scottish Independence Referendum Act 2013. As with many pieces of legislation, there were many hoops to jump through. One such hoop was formal agreement between the Scottish Government and the United Kingdom Government. At the end of the day:

The governments agreed that the referendum should:

- have a clear legal base;

- be legislated for by the Scottish Parliament;

- be conducted so as to command the confidence of parliaments, governments and people;

- deliver a fair test and a decisive expression of the views of people in Scotland and a result that everyone will respect.[4]

It is important to note that “not only that the UK Government has accepted the fundamental principle that the Scottish people have the right, by way of referendum, to determine whether or not they will remain within the United Kingdom, but that both governments have been able to reach agreement as to the referendum process.”[5]

All of this to say, it is unclear what the next step for Scotland should be. With trading costs, currency, and referendum regulations, one might think that Scotland has enough to worry about should it decide to leave the UK. However, this post has only mentioned a fraction of the concerns that are looming in Scotland’s decision.[6]

What is clear is that Scotland clearly has the right to hold another referendum.[7] Scotland’s First Prime Minister, Nicola Sturgeon, has repeatedly expressed Scotland’s intent to hold a second referendum in the event that the UK begins formal proceedings to leave the EU. After all, Scotland voted heavily in favor of remaining in the EU (62% in favor of staying with the EU), and now that UK is set to leave, a second referendum may be in Scotland’s best interest. Regardless of whether Scotland decides to stay with the UK or leave to go to the EU, interesting times lie ahead.

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[1] “Scotland, ‘Brexit’, and the UK” available at https://d3n8a8pro7vhmx.cloudfront.net/scotlandinunion/pages/377/attachments/original/1453372484/Brexit_PDF.pdf?1453372484.

[2] Id.

[3] Id.

[4] Legal issues surrounding the referendum on independence for Scotland, E.C.L. Review 2013, 9(3), 359-390, 362

[5] Id.

[6] For a detailed outlook on Scotland’s referendum concerns, see id.

[7] http://www.newsweek.com/how-scotland-and-n-ireland-could-retain-eu-membership-474931 (The Scots have every right to hold such a referendum, because the terms specified in the SNP’s election manifesto have been met: a major material change in circumstances has occurred”).