The outcome of the Scottish referendum may have been a close call, but there’s one clear benefit to the UK remaining united; Scotland and England have both been spared the economic upheaval that would have resulted from a separation. If Scotland would have voted yes to independence, the fiscal fallout would have been, at best, dramatic and unpredictable. Consider that the GDP of Scotland is $245 billion, in comparison to the $2.49 trillion GDP of the entire UK. Scotland makes up 10 per cent of the overall UK economy; a Yes vote would have significantly cut the GDPs of both nations, and Scotland’s economy would be in for a struggle.
Here’s a breakdown of the economic benefits of remaining united.
A Currency in Question
If Scotland were to separate, what currency would the newly independent country use? The Scottish National Party said it would want to keep the pound, with the (now former) SNP leader Alex Salmond stating the “pound belongs as much to Scotland as it does to England.” However, the Bank of England said it would not allow Scotland to use the British Pound. BOE Governor Mark Carney stated allowing an independent Scotland to use the pound “is not compatible with sovereignty.” In that case, there would be two options: Scotland apply to use the Euro or create a new currency, which would come with its own set of challenges.
Also read: Mark Carney Named Bank of England Governor>
Government Payments Up for Debate
The next key issue would be dealing with government payouts to Scottish residents; welfare, payments to seniors, disability, tuition subsidies, and health care all would be up for debate if the country had voted to separate. Scotland would have more to lose in this scenario; each Scot receives a yearly average of £1,623 or $2,917 more in public funding than their English counterparts. Scottish residents could face a sharp rise in taxes to deal with the shortfall.
Shared Utilities and Resources
Pro-independence leaders were confident Scotland’s economy would survive on the vast oil reserves it has in the North Sea. In 2012, a Scottish government-led group of industry leaders published an Oil & Gas Strategy article. It estimated there are up to 24 billion barrels of oil and gas reserves that could be recovered off the Scottish coast. The group said that the reserves “at wholesale prices” would have a value of 1.5 trillion pounds, or $2.5 trillion, equal to 10 times the size of the entire Scottish economy. As well, according to Bloomberg news, Scotland has about 43 per cent of the UKs wind power capacity and exports a quarter of its electricity.
Prior to the vote, there was no indication that an independent Scotland wouldn’t be allowed into the European Union. But there would still be a process for the nation to join it. If, for some reason, Scotland was not granted permission to enter the EU, it could have created massive issues for those that work in England and live in Scotland or the other way around. There would be border checks, residents would have to carry passports and maybe even get visas to enter.
The Best Move?
I can’t speak to the emotional side of why Scots would want to separate after being part of the united union for 307 years, but financially speaking, it was the more responsible move. There are so many other issues that would have risen from separation. For example what happens to expats who hold UK citizenship but are born in Scotland? How would the value of the British pound be affected, and would the nation remain part of the G7? These are just a few of the issues that would require immediate attention.