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Scots weigh economic uncertainty of independent future

BP’s North Sea Headquarters in Aberdeen, Scotland. (Reuters)

ABERDEEN: The prospects for Scotland’s economy after Brexit are at the heart of the battle between its pro-independence first minister and British Prime Minister Theresa May, who wants Britain to stay united as it leaves the EU.
Nicola Sturgeon has warned that leaving the bloc’s single market will cause tens of thousands of job losses in Scotland, while May has said she will aim for the “best possible deal” with Brussels — for Scotland too.
Going it alone raises a host of doubts about Scotland’s economy including what currency it would use and how it could reduce a budget deficit of 9 percent of gross domestic product (GDP) — worse than crisis-hit Greece.
But the future of the North Sea oil sector — centered on the city of Aberdeen, where Sturgeon’s Scottish National Party (SNP) held its conference this weekend — is the key concern. World oil prices have declined in recent years and the offshore stocks are depleting. Deirdre Michie, head of Oil & Gas UK, the leading association for the North Sea industry, told AFP the sector was going through “quite a sustained downturn.” The oil industry employs around 330,000 people across the UK, including around 38 percent based in Scotland — many of them in Aberdeen.
Aberdeen’s business community is wary about another constitutional confrontation just three years after the last independence referendum in which Scotland voted to remain a part of Britain by 55 percent.
Sturgeon’s announcement last week of her plans for a referendum generates “continued uncertainty and it is just a matter of fact that business does not like uncertainty,” said James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce (AGCC).
But Bream said he was not surprised by the announcement since “the argument about independence has never gone away” despite the result of the 2014 plebiscite.
The unionist campaign in that vote was heavily focused on the economic benefits of being a part of the UK.
The argument emphasized the “broad shoulders” of the union, which can cushion Scotland from shocks such as a financial crisis or oil price crash, as well as raising doubts about Scotland’s ability to manage on its own.
As Scots face up to the prospect of a new referendum — the arguments on both sides are being rehearsed.
Sturgeon has said she wants to prevent Scotland, which voted strongly to remain in the EU in last year’s Brexit vote, being “dragged out” against its will. She is widely expected to get the Scottish Parliament’s support for her quest in a vote on Wednesday but still needs the agreement of the British government to proceed.
Alex Kemp, head of the Aberdeen Centre for Research in Energy Economics and Finance (ACREEF), said Scotland “comes out quite well” in economic comparisons to EU countries, particularly to poorer Eastern Europe.
Scotland’s GDP per capita of $41,239 (€38,360) is roughly equivalent to that of Belgium or Finland, and higher than the British average, according to data reported on the Scottish government’s website earlier this month.
The comparison members of the world’s leading economies group, the Organization for Economic Co-operation and Development (OECD), took into account “a geographic share of offshore oil and gas output” for Scotland. But the data is from 2014 statistics and in many ways Scotland is now in a worse position.
The oil price fall has blasted a hole in its public finances, creating a major deficit.
“As things stand at the moment, the Scottish economy would have a budgetary deficit for sure,” Kemp said.
“We have modeled the oil tax revenues, and for some years ahead they are really quite modest and the only thing that would change that would be a major, and really quite unexpected, increase in the oil price.”
With a flourishing financial sector, as well as tourism, textiles and fishing, Scotland is far from being a poor country, and does not necessarily lack the means to close the gap.
Scottish government minister Mike Russell told AFP it was “nonsensical” to argue that Scotland could not go it alone economically.
“But the issue now is democracy, a democratic choice, and the right of the Scottish people to decide their own future,” he said.

ABERDEEN: The prospects for Scotland’s economy after Brexit are at the heart of the battle between its pro-independence first minister and British Prime Minister Theresa May, who wants Britain to stay united as it leaves the EU.
Nicola Sturgeon has warned that leaving the bloc’s single market will cause tens of thousands of job losses in Scotland, while May has said she will aim for the “best possible deal” with Brussels — for Scotland too.
Going it alone raises a host of doubts about Scotland’s economy including what currency it would use and how it could reduce a budget deficit of 9 percent of gross domestic product (GDP) — worse than crisis-hit Greece.
But the future of the North Sea oil sector — centered on the city of Aberdeen, where Sturgeon’s Scottish National Party (SNP) held its conference this weekend — is the key concern. World oil prices have declined in recent years and the offshore stocks are depleting. Deirdre Michie, head of Oil & Gas UK, the leading association for the North Sea industry, told AFP the sector was going through “quite a sustained downturn.” The oil industry employs around 330,000 people across the UK, including around 38 percent based in Scotland — many of them in Aberdeen.
Aberdeen’s business community is wary about another constitutional confrontation just three years after the last independence referendum in which Scotland voted to remain a part of Britain by 55 percent.
Sturgeon’s announcement last week of her plans for a referendum generates “continued uncertainty and it is just a matter of fact that business does not like uncertainty,” said James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce (AGCC).
But Bream said he was not surprised by the announcement since “the argument about independence has never gone away” despite the result of the 2014 plebiscite.
The unionist campaign in that vote was heavily focused on the economic benefits of being a part of the UK.
The argument emphasized the “broad shoulders” of the union, which can cushion Scotland from shocks such as a financial crisis or oil price crash, as well as raising doubts about Scotland’s ability to manage on its own.
As Scots face up to the prospect of a new referendum — the arguments on both sides are being rehearsed.
Sturgeon has said she wants to prevent Scotland, which voted strongly to remain in the EU in last year’s Brexit vote, being “dragged out” against its will. She is widely expected to get the Scottish Parliament’s support for her quest in a vote on Wednesday but still needs the agreement of the British government to proceed.
Alex Kemp, head of the Aberdeen Centre for Research in Energy Economics and Finance (ACREEF), said Scotland “comes out quite well” in economic comparisons to EU countries, particularly to poorer Eastern Europe.
Scotland’s GDP per capita of $41,239 (€38,360) is roughly equivalent to that of Belgium or Finland, and higher than the British average, according to data reported on the Scottish government’s website earlier this month.
The comparison members of the world’s leading economies group, the Organization for Economic Co-operation and Development (OECD), took into account “a geographic share of offshore oil and gas output” for Scotland. But the data is from 2014 statistics and in many ways Scotland is now in a worse position.
The oil price fall has blasted a hole in its public finances, creating a major deficit.
“As things stand at the moment, the Scottish economy would have a budgetary deficit for sure,” Kemp said.
“We have modeled the oil tax revenues, and for some years ahead they are really quite modest and the only thing that would change that would be a major, and really quite unexpected, increase in the oil price.”
With a flourishing financial sector, as well as tourism, textiles and fishing, Scotland is far from being a poor country, and does not necessarily lack the means to close the gap.
Scottish government minister Mike Russell told AFP it was “nonsensical” to argue that Scotland could not go it alone economically.
“But the issue now is democracy, a democratic choice, and the right of the Scottish people to decide their own future,” he said.

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