Scotland: Could it become Greece without the sun?

  • Scottish independence would entail significant economic risk. Scotland’s budget deficit is currently over three times higher than the UK average as a % of GDP.
  • North Sea oil and gas revenue expectations have plunged. Expected revenues of £6.8 to 7.9bn this year have fallen to just £0.5 to 2.8bn.
  • Two thirds of Scotland’s exports go to the rest of the UK but just 15% go to other EU countries, further questioning the economic rationale behind Scottish independence.
  • Euro membership would expose Scotland to the risk of more asymmetric economic shocks, and the European Central Bank would be less capable of responding to shocks compared to the Bank of England.
The EU referendum has exposed wide divisions across nations of the UK. While England voted by a margin of 6 percentage points to leave the EU, Scotland overwhelming supported remaining within the EU. In response, Scotland’s first minister Nicola Sturgeon said that a second referendum on Scottish independence is “on the table” and “highly likely”. This economic bulletin seeks to examine the economic backdrop to the prospect of a second referendum, and whether this backdrop would influence the result of a referendum if it were held over the next few years.
Image: Creative Commons/Scottish Government 

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Daniel Mahoney, Tim Knox - Saturday, 2nd July, 2016