Many people across Scotland including businesses and experts have not got their heads around “Brexit 2.0”: the new thicket of regulations that will be painful barriers to trade in goods and services with the EU. It is terrible news for the Scottish economy – but the fact that it is looming will boost the strength of feeling in the Scottish independence movement.
At the recent march and rally, First Minister Humza Yousaf spoke about the “historic wrong” that has been done to Scotland. Brexit is a slow motion catastrophe that is stripping prosperity and opportunity from Scots and Scotland. The cost of living crisis won’t end as long as Scotland is still subject to Brexit. The next phase will see it get worse – before it gets better with independence.
What Brexit 2.0 means for Scottish businesses
The EU’s new green tax is designed so that countries which manufacture goods in a less environmentally friendly way don’t get to undercut producers in the EU – as doing so would slow down and disincentivise the transition to net zero. It has a soft start next month before coming in in earnest in 2026.
From October, EU companies must report on the carbon emissions attached to some imported goods with businesses having to buy certificates to cover pollution embedded in products from 2026. The paperwork and costs associated with the carbon tax will hurt Scottish companies that supply products to EU businesses covered by the green tax. Simply put, it will be much easier for EU businesses to buy components from Seville than Selkirk.
Also changes to EU VAT rules from January 2025 will require businesses providing services — even electronically — to pay the tax where the customer resides. “If you’re a UK-based cook who provides cooking classes to EU customers — either in person, or online from the UK — then from January 2025 you’ll need to pay VAT in the EU customers’ state,” William Bain, head of trade policy at the British Chamber of Commerce said.
Bain told the FT that this was the start of Brexit 2.0 and that UK SMEs will face an “avalanche” of EU regulations and taxes – but a BCC survey found 8 in 10 don’t know how the situation will affect them.
Brexit 2.0 is also a nightmare for Northern Ireland
The ramifications for goods produced in Northern Ireland is far from clear. Northern Ireland does not have a sitting government in Stormont so it can’t apply the ‘Stormont Brake’ under the Windsor Framework.
That means that technically the EU’s new rules will automatically apply to Northern Ireland. But how will that work in practice? They import components from the UK and they use energy supplied under the UK’s regulatory regime. It promises to create a dog’s breakfast large enough for a family of Irish wolfhounds.
Labour is promising what it can’t deliver
The Labour Party under Keir Starmer is promising a better deal with the EU. Yet if he keeps to his own red lines, Starmer is powerless to meaningfully improve the UK’s relationship with the UK.
By ruling out single market membership and a customs union with the EU, Starmer has boxed himself into a corner. To placate voters in England he has effectively hung Scotland and Northern Ireland out to dry. Neither country voted for Brexit – both are seriously harmed by it. Labour has ruled out meaningful change.
Scotland needs to move out from under the weight of the dying Union
Brexit 2.0 will supply a new sense of urgency to the Yes campaign. Scotland is shackled to a failing and divided country – England – where neither of the ruling parties is in a position to improve the relationship with Europe.
Scots would like to see the governments they elect to be able to pursue the priorities of the people. They want Scotland to rejoin the EU. They want to be part of an effective move to net zero and to rebuild food and energy security along with our European neighbours. They also want the freedom and opportunity to live and work across the EU.
Brexit 1.0 was forced on the Scottish people against their democratically expressed wishes. No compromise was offered. It certainly rankles. Now Brexit 2.0 is looming. That is likely to increase the sense of urgency for independence.