Scotland & the EU

No hiding place from Brexit fallout anywhere in Scotland

Aberdeen hit by Brexit

Since well before the EU referendum I have been shouting from the rooftops that Scotland does well out of EU membership, and that a Brexit of any kind will hurt here more than it will the rest of the UK, who actually voted for it. If you have 8.4 per cent of the population and receive around 17.5 per cent of all of the EU grants to the UK then Brexit just has to hurt more.

Day by day we are seeing more and more data arrive that proves my point, and its not all related to EU grants. Brexit information is fractured and complex, though, and because researchers don’t know what the end deal will be, we can’t say with absolute certainty exactly who will suffer the Brexit pain and where.

I can’t decide if forlorn hope or just straightforward denial is what is keeping the light flow of calls to “think again and stop” Brexit from turning into an overwhelming flood.

It would be unfair to say that there seems to have been a mainstream media blackout in reporting the evidence that points to the unfolding economic disaster that Brexit will bring but it certainly hasn’t been fairly reported. When 100 business owners (all employers) sign a petition demanding Scotland be allowed to stay in the single market to protect jobs, it gets hardly any coverage but when the director of Highland Spring who doesn’t even own the company and who doesn’t export says let’s get on with it, it’s big news.

As one farmer said to me this week: “It’s disingenuous for business leaders like Banford (JCB) & James Dyson to say ‘Brexit will be fine for business’ because there is a world of difference between a mechanical digger or a vacuum cleaner staying in a warehouse for an extra couple of weeks while they clear the paperwork – and the same thing happening to a punnet of Scottish strawberries.”

No one seems to want to report that 73 per cent of Scottish farm business are not profitable without EU Common Agricultural Policy payments. That simple fact in my view demonstrates that we are sleepwalking into potential rural economic armageddon if Westminster does not maintain subsidies (it can ill afford) or if food prices don’t rise by more than 10 per cent immediately. CAP isn’t just a farm subsidy, it subsidises you and me at the supermarket till. Some 85 per cent of Scottish farmland is classified as less favoured area compared to only 15 per cent in England. Less Favoured Area Payments are not guaranteed beyond Brexit and could stop immediately. Evidence again that any form of Brexit will do more damage to Scotland’s farming sector than it will to the UK as a whole.

At least the city economies will be OK though? Not a chance.

The report from the Centre for Cities and the Centre for Economic Performance at the London School of Economics, has predicted Aberdeen to suffer the most economic damage of all UK cities from Brexit and placed Edinburgh 6th on the hit list.

They looked at a soft Brexit with EFTA-style single market access and also a hard Brexit where the UK would revert to WTO trade rules and tariffs. They state that every UK city will see an economic downturn and that even a soft Brexit would increase the cost of trade through increased bureaucracy customs checks and exporting related legal issues. The prediction is that Aberdeen would see a fall in economic output over 10 years of 3.7 per cent with a WTO arrangement and 2.1 per cent with an EFTA deal. Edinburgh figures were 2.7 per cent WTO and 1.4 per cent EFTA and Glasgow 2.4 per cent WTO and 1.3 per cent EFTA. Small numbers aren’t they, 2.7 per cent to 1.3 per cent – but that’s billions in economic output and relates to as many as 40,000 jobs lost in those three cites alone.

The more internationally connected your city or industry is, the harder the economic fallout from Brexit will be, so it makes sense that those international cities and their surrounding areas will be hit hardest.

Think of the wider Aberdeenshire economy, already depressed by cuts in Oil and Gas sector jobs, and the fishing dependent areas such as Fraserburgh and Peterhead. Scotland produces 20 per cent of the EU’s seafood catch and accounts for 62 per cent of all seafood landed in the UK, 66 per cent of which is instantly exported to the EU. The boat owners don’t like being told what they can catch, and I am not saying that the EU fisheries policy isn’t flawed, but if they had kept on fishing without quotas fish stocks would have flatlined and there would be no boats and no onshore processing industry, which employs far more people. Westminster has a long track record in letting Aberdeen down. When the region asked for £2.9 billion in support following the oil price drop, the then-Prime Minister David Cameron visited the Aberdeen to announce Westminster would offer £125 million. A raw City Deal when contrasted to the £300 billion Aberdeenshire contributed to the Treasury over the last 40 years.

Eventually (in many years) the oil will run out but Aberdeen’s greatest future asset is its energy sector knowledge that can be used to relaunch the city as the global centre for renewable energy.

Scotland possesses 25 per cent of Europe’s tidal wave energy resources and 10 per cent of its wave energy potential. However, Westminster cuts to grants for renewables to fund English nuclear power generation at Hinckley Point are predicted to lower Scotland’s GDP by more than £3bn, denying us the opportunity to capture the energy and North Sea engineering knowledge of Aberdeen that would allow Scotland to take the global lead in renewables.

There has been some good news for renewables this week with the world’s largest floating wind farm being built just off the Aberdeenshire coast. Five 6Mw windmills due to generate electricity before the end of this year. However, the facility is being built and managed by Statoil, the state-owned Norwegian energy company whose profits go to fund the pensions of the citizens of the thriving small independent northern European nation of around 5.5 million people. As Michael Caine once said, “Hang on a minute lads, I have an idea.

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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

4 Comments

  • And yet by voting to leave the EU, and following this up by voting Conservative in the GE, the farming community continues to deny reality. Their choices defy explanation. These are not just stupid decisions, they are criminally stupid decisions.

    Their inability to connect the dots is what blinds them to the power their lobby would hold in an independent Scotland. Masters in their own house. Instead, they cling to the faint hope the Home counties will not abandon them to the fates. Poor deluded fools. Only Hell will mend them. They will of course continue to blame their misfortunes on the SNP.

    • Farming communities are bereft of young people, the majority of votes are cast by retired and in the areas in question often wealthy people people not connected to the farming businesses that sit at the heart of their communities and so are detached from the consequences. I don’t know a single farmer who is happy about Brexit.

  • Do these falls in economic output take full account of the knock-on effects to other parts of the economy as consumer spending and business spending fall, resulting in lower tax revenues and either further austerity or increased borrowing? Do they take full account of the resulting falls in business confidence and consumer confidence and the effects that these can have on the wider economy?

    • Largely no, they are based on output in terms of the cities report, so yes there may well be a major multiplier effect from lower consumer spend and confidence. There will also very likely be higher interest rates and that will mean people in debt having less deposable income and significant price inflation – frankly its so difficult to model and with no good news / silver linings so all we can say is that no deal / a bad deal will be catastrophic and chaotic. Why are people not yet panicking? Because the situation is so confusing and so difficult to predict, until we see the final deal that to most people see just keeping their head down and hoping for the best is the only plausible coping strategy.

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