Matthew Lynn

Scotland has nothing to gain from staying in the single market

Scotland has nothing to gain from staying in the single market
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The Scottish economy will be left in ruins. Tens of thousands of people will be thrown out of their jobs. The tax base will shrivel. To listen to the latest round of complaints from the Scottish National Party, membership of the single market is absolutely vital to the country’s economy. Indeed, it is so important that it now wants to maintain it, even if England and the rest of the UK leaves.

That might be clever politics, if it can be turned into a platform for a second referendum and if you choose to believe that the constitutional lawyers in Brussels can come up with a way of keeping one part of a country inside the single market with the rest outside. But it is terrible economics. Why? Because Scotland gets even less from it than the UK does. Project Fear doesn’t make any more sense when it comes wrapped in the cross of St Andrew rather than St George.

Admittedly, the SNP doesn’t usually let small matters like reality intrude on its thinking. But if you take the trouble to look up some of the actual numbers, the argument is way, way on the wrong side of barking mad. Scotland, as it turns out, doesn’t actually trade that much with the rest of the EU. According to figures from the Scottish government, once you exclude oil & gas, then Scotland chalks up exports of £11.6bn to the EU per year. By contrast, its sales to the rest of the world were £15.2bn, while the rest of the UK accounted for a whopping £48.5bn. Even more seriously, last year, its exports to the EU fell by eight per cent, the worst result of any of the four countries in the UK. Its largest trade partner is the US, not any country in the EU. Its second largest trade partner is the Netherlands, but that is nearly all stuff that goes to Rotterdam for re-export. So the idea that Scotland is packed full of factories manufacturing things for France, Germany and Spain is a complete myth.

Pause to crunch some numbers, and the SNP’s position is even nuttier. In order to preserve those £15bn of exports to the EU – and keeping in mind that a chunk of that is simply being re-exported, and could take another route – the Scottish government will accept potential tariffs on the £48.5bn of exports to England. You can use lots of words to describe that – but ‘sensible’ would not be one of them.

Even freedom of movement doesn’t make much difference. In highly-skilled roles, foreign-born workers account for around four per cent of staff in Scotland, much the same as the rest of the UK once London is excluded. But in the labour-intensive workforce, which is where free movement makes a difference, it is only eight per cent, compared with 12 per cent for the UK overall. In fact, the Poles and Hungarians don’t especially go to Scotland.

They probably don’t mind the weather - it is drizzly in Poland as well - but its relatively sluggish economy doesn’t generate the kind of jobs they need.

True, Edinburgh benefits a bit from the ‘passporting’ rules in financial services that allow Edinburgh’s fund managers to sell their investments across Europe. They will miss those if they lose them. But if Scotland was inside the single market, and England outside, that would be a disaster for the Scottish economy. That might not matter to the SNP. As we learned with its cavalier attitude to what currency it might use as an independent nation, it doesn’t worry about such things. But it will probably matter to Scottish voters once they realise they are being sold nonsense.