Leaving the European Union (EU) undoubtedly represents the greatest change for the UK economy in a generation. It will impact the way we trade as well as the sources of investment and supply of workers. At the same time, by no longer being formally tied to EU rules, future UK economic, social, environmental and financial policy may look quite different.
There remains considerable uncertainty about the costs and benefits of Brexit. Many of the changes will be hard to measure, whilst others will be spread out over a number of years. At the same time, how policymakers react – both in the UK and outside – will have an important bearing on outcomes. As with any change, there will be winners and losers.
The risks and opportunities could look quite different for individual sectors and companies. The potential impacts on Scotland are our focus in this report. Scotland voted differently from the UK as a whole in the referendum. The complexities of the devolution settlement, and the different structures of the two economies, mean that it is hard to argue that the implications of Brexit will be uniform between Scotland and the UK.
This report summaries the economic links between Scotland and the EU, and provides some background information on the links between Scotland and the EU by sector.
In 2015, Scotland exported £12.3 billion of goods and services to the EU – equivalent to over 40 per cent of Scottish international exports – more than exports to North America, Asia, South America and the Middle East combined. But the data shows that many other parts of the UK appear relatively more open to EU trade.
Six of Scotland’s top 10 destinations for exports are in the EU. A further two – Norway and Switzerland – are part of trade arrangements with the EU which may need to be negotiated post-Brexit.
There are around 1,000 enterprises in Scotland where the parent company is from another EU country and they employ around 130,000 people. At the same time, there were around 180,000 EU nationals living in Scotland in 2015 – indeed it is estimated that half of the net increase in the Scottish population between 2000 and 2015 has come from people born in EU countries.
It is estimated that around 134,000 jobs are currently supported by export demand from the EU, and slightly under 196,000 from the rest of the world. It is estimated that over 560,000 jobs in Scotland are supported by demand from the rest of the UK.
In other words, nearly 6 per cent of total employment in Scotland (excluding public sector administration and defence) was supported by demand currently driven by exports to the EU.
Of the 134,000 jobs estimated to be supported by demand from the EU, around 55,000 were in manufacturing and 73,000 in services. The higher number in services reflects the impact of spill-over effects from trade into the wider Scottish economy.
In manufacturing, this includes around 13,000 job in food and drink, and 11,000 jobs in metal work and machinery. In services, nearly 30,000 jobs in finance and business services are estimated to be currently supported either directly or via wider spill-over impacts by demand from the EU. The equivalent figure for distribution, hotels and catering is 22,000.