The UK would have to strike a trade agreement with an independent Scotland

Scotland is the UK’s second-largest national export market. With the dual economic crises of the pandemic and Brexit weakening the UK in the coming decade, London would need a free trade agreement with an independent Scotland.

Through the EU, the UK has unrestricted export access to 27 countries across the European continent, as well as 4 additional partners – Switzerland, Norway, Iceland and Liechtenstein – in the EFTA bloc. The EU also acts as a trading middleman between the UK and many international partners outside of the EU and EFTA. This is because the EU often operates as a single political unit in the world stage to increase its power in economic negotiations and secure a better deal for its members than they could possibly do so on their own.

Yet the EU’s role in facilitating UK trade with the world will end come January 2021 as the UK makes its final exit following the 2020 transition period. This has left officials in the UK government scrambling to secure its own bilateral trade agreements which will be terminated by its withdrawal from the EU.

So far, 20 agreements have been signed. This includes EFTA members, as well as Chile, Israel and South Korea, to name a few. But these 20 partners are structurally insignificant to both the UK and the global economy: together they account for just 8 per cent of UK trade. A further 18 trade discussions are ongoing, with players such as Canada, Singapore and Turkey – also structurally insignificant.

However, it is unlikely that the UK will be able to negotiate terms and secure signatures for trade agreements with these countries whilst such a large proportion of national resources are focussed on the Coronavirus pandemic. This is equally true of the structurally significant markets in the world economy, such as the United States, European Union and China, with whom the UK seems to have made few strides in building free trade agreements. Worse, in spite of this, the UK government is not interested in extending the Brexit transition period further into 2021 and has now missed the end of June deadline to do so.

The reality now is that, with just 8 per cent of UK trade covered and the pandemic creating few prospects of increasing this figure further before January 2021, the UK is heading for an economic calamity next year, as the economic effects of the lockdown collide with those of Brexit.

This decade will be a difficult one for the UK, as it attempts to stabilise and readjust its position in the global economy. What the UK cannot be is selective, hence why it has signed agreements and engaged in discussions with countries of relative insignificance. In short, it will try to cover as much of its economy as possible.

Tougher still, the UK government must deal with the reality of growing public support for independence in Scotland, and the idea of Scotland becoming independent in this decade. To counter this, the UK government – and many groups within civil society opposed to Scottish independence – have campaigned on the basis that Scottish independence would throw the country out of the UK’s internal trading market, plunging the new state into economic crisis. They deny the possibility of Scotland negotiating, as an autonomous entity, access to the UK’s internal market, as many countries have already done – with the UK’s encouragement – in anticipation of Brexit. This is based on the notion that the UK would refuse a free trade agreement with Scotland, a prospect they claim would hurt Scotland more than the remainder of the UK.

However, any reasoned analysis demonstrates that this is clearly just political posturing. To reassert, in this decade, as the UK withdraws from the EU’s common market and the long recovery from the pandemic begins, London cannot be selective in terms of who gains access to its national market, and what national markets it gains access to. In a weak position, it will be engaged in total crisis mitigation.

Given this, the remainder of the UK is unlikely to refuse Scotland entry to the UK internal market, as Scotland is its 2^ndlargest national export market (3^rd largest if we consider the EU as a single partner).

The Rest of the UK’s Top 25 Export Markets Including Scotland (2018)

Sources: Office for National Statistics (2020); Scottish Government (2020). Note: This data includes both exports in goods and services for the year 2018.

Any decision by London to deny its second-largest national export market a free trade agreement would be madness in the current environment. Rather, the UK government will choose to be pragmatic, with its economic situation forcing it to accept the new political reality in the British Isles. London will quickly sit down with Scottish representatives to negotiate a trade agreement and prevent further destabilisation of the economy of England, Wales and Northern Ireland.