Prospects look negative for Scottish economy in wake of Brexit
EUROPEAN ECONOMIC AREA (EEA) members may be hostile to a post-Brexit UK joining its ranks, according to an economic expert giving evidence at a Scottish Parliament committee on external affairs and Europe.
According to Dr Graeme Roy of the Fraser Allander Institute, any new member with that status and of the size of the UK could upset the delicate series of arrangenments that govern EEA nations' deals with the European Union (EU).
On alternatives to the EU single market, Dr Roy, said: "I'm sceptical about any deal which involves the ceasing of freedom of movement.
"Also, such a big player as the UK entering the European Economic Area (EEA), would fundamentally alter the balance between the nations already with that status, Liechtenstein, Norway, Iceland.
"The reaction may not be positive."
"Short term stimulus is an option but it could be undermined by the political uncertainty and volatility of negation seven after the three year negotiation period." Dr Graeme Roy
Various sectors and experts on business, industry and trade gave their comprehensive and professional views on what leaving the European Union (EU) would do to Scotland's economy.
Their main focus was on the necessity of the single market and trade, the fundamental state of Scotland's economy at present and possible effects of any alternatives to EU membership. There was also concern that the delay in the invocation of Article 50 would cause short and long term damage in terms of uncertainty, lack of investments and cancellations.
Dr Roy and Kenny Richardson, senior director of economics at Scottish Enterprise, also said there was a "lack of knowledge at UK Government level and in some businesses about the way free trade agreements work".
Having written a paper in early July on the topic, he said: "There's a significant difference between a free trade area and access to the single market.
"For example, being part of a free trade area does not remove non-tariff barriers to give access to services one might need
"If we look at the four freedoms, of which freedom of movement is one – now this is closely connected to freedom of establishment (a service).
"When a German wants to move here and set up a business, or if we think of a company’s ability to easily hire from abroad, all this will be affected."
These companies had turnover (sales) of £42.1bn adding £15.8bn in Gross Value Added (GVA) to the Scottish economy in 2013.
A Scottish parliamentary briefing, published in October 2015, found there are nearly 4,600 business sites in Scotland owned by non-UK, European-owned companies. These companies had turnover sales of £42.1bn adding £15.8bn in Gross Value Added (GVA) to the Scottish economy in 2013.
The figures exclude some financial service activities and public sector activities and are even larger than London with something of the range of 12.5-15 of European-owned businesses for the period of 2009-2013.
"When a German wants to move here and set up a business, or if we think of a company’s ability to easily hire from abroad, all this will be affected." Dr Graeme Roy
A Fraser of Allander Institute survey, following the EU referendum, saw 49 per cent businesses in Scotland cite continued access to the single market as a key issue. Scottish exports to the EU were worth £11.56bn in 2014. This is 8.5 per cent (£985m) lower than in 2013. They have grown by six per cent (£670m) since 2002 and by 36 per cent (£3m) since their lowest point in 2005.
Since 2002, exports to the EU have fallen as a proportion of total exports. They currently make up 42 per cent of total international exports, down from 54 per cent in 2002, however the Fraser Allander institute puts this decline more down to the ability of the EU to trade in behalf of Scotland as a block.
The three biggest recipients of Scottish exports in 2014 were the Netherlands, France and Germany, each of which makes up around 16 per cent of EU exports.
All witnesses agreed that it is imperative wether inside or outside the single market than Scotland improves its trading scope and volume.
SNP MSP and committee chair Joan McAlpine described the accounts and accompanying reports as "sobering reading on prospects for Scotland."
SNP MSP and committee chair Joan McAlpine described the accounts and accompanying reports as "sobering reading on prospects for Scotland."
Green MSP, Ross Greer, asked what businesses felt about the idea of a post-Brexit stimulus, given that, as Dr Roy stated, the economy could see "relative slow and flat growth".
In response, Dr Roy said: "Short term stimulus is an option but it could be undermined by the political uncertainty and volatility of the three-year negotiation period."
Earlier this week, First Minister Nicola Sturgeon, in a speech at the Institute for Public Policy Research Scotland (IPPR), laid out what she said were the specific interests the Scottish Government wanted to safeguard in a post-Brexit UK.
In her speech, covered by CommonSpace, Sturgeon said there were five key tests that focuses on Scottish interests, that could not be overlooked by the UK Government if it wished to demonstrate that Scotland was a valued partner in the union.
Picture courtesy of Nathanael Williams
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