Assessing the Impact of Independence On Scottish Agriculture

Image by Duarte JH

The UK’s vote last year to leave the EU has resulted in Scotland once again re-evaluating whether or not independence would be in its best interests. The Brexit decision and the subsequent triggering of Article 50 have both generated significant political upheaval throughout the UK. In a recent speech, Nicola Sturgeon has added to that turmoil by suggesting that now that the UK is leaving the EU Scotland should have a second referendum on independence in either 2018 or 2019. Scotland’s First Minister has been extremely vocal in her opinion that the question of independence deserves to be raised again, despite previously claiming that the first independence referendum was a ‘once in a lifetime’ event.

Since then, the SNP has seized on the opportunity presented by Brexit to press hard for another chance at gaining independence for Scotland, and the debate is already in full swing once again, with all sorts of projections and claims from both sides making it difficult to form an opinion on the merits of either independence or remaining a part of the UK.

One sector that could well see significant disruption if Scotland were to gain independence is agriculture, the success of which is bound up with Scotland’s ties with the rest of the UK.

With more than 290,000 people working in farming and more than 70% of the UK’s land under agricultural use, farming has a huge impact, directly and indirectly, on all of us. With many farmers and related businesses operating on both sides of the Scottish border there would inevitably be significant repercussions for many companies if Scotland gained full independence.

It seems that huge change is now inevitable for Scotland as it faces a new relationship with the EU. Should Indyref2 come off and bring about a different result than in 2014 then a new relationship beckons with the rest of the UK as well.

Much has been made in the media in recent weeks of the distinction between a ‘soft Brexit’ and a ‘hard Brexit’, and that distinction could make a huge difference to Scotland. Under a soft Brexit deal the UK would retain access to the single market, whereas under a hard Brexit single market access would be restricted and trade between the UK and the EU would be subject to tariffs and import/export restrictions.

For Scotland, a soft Brexit would mean that as part of the UK it could continue to trade through the EU Single Market. If Scotland gained independence and stayed in the EU a soft Brexit would still be desirable, as it would mean that it could retain its trading relationship with the rest of the UK. A hard Brexit, on the other hand, would be difficult for Scotland whether or not a second referendum means that it gains independence. Whilst most MSPs would undoubtedly like to see a soft Brexit that gave access to the Single Market, it is fair to say that there are rumblings of discontent down in Westminster about this option, largely because of the concessions that will likely need to be made to secure Single Market access. Those concessions are likely to be on the free movement of people.

With Scottish exports to the UK totalling almost £50 billion in 2015, and exports to the EU adding a further £12.3 billion, the outcome of the Brexit negotiations will clearly have a significant impact on Scotland. If Scotland votes for independence, however, there is a real risk that it will have little to no influence in those negotiations.

Trade is not the only thorny issue when it comes to Scotland’s future after Brexit. It is thought that around 181,000 EU citizens are currently living in Scotland, with many of them working in unskilled jobs, particularly in the agricultural sector.

Since immigration played such a big part in the Brexit referendum it seems unlikely that the UK government will concede defeat on the issue of immigration controls during Brexit negotiations, leaving a question mark over the heads of those EU nationals who are already living and working in the UK. If free movement is restricted in some way it could result in the agricultural sector finding it increasingly difficult to fill vacancies. An independent Scotland, on the other hand, could make it harder for Scots to work in the rest of the UK and for non-Scottish citizens to cross the border to work.

Regional funding is another major concern for Scotland as the Brexit talks get under way. Under the Barnett Formula each part of the UK is allocated its share of public funding according to certain rules, ones which have historically and controversially favoured Scotland. With Scotland currently receiving the largest per capita public spending amount of any of the four UK member nations, leaving the UK could have a dramatic impact on the Scottish economy and public finances. With oil prices currently fairly low, many are questioning whether Scotland’s North Sea oil wealth would be enough to bridge the funding gap.

Funding is also a factor for Scotland when it comes to the EU as it receives a great deal in subsidies, particularly in the agricultural sector. With 85% of Scotland’s land designated as ‘Less Favoured Areas’, the country receives significant financial support for farming this land. If Scotland remains in the UK these subsidies are likely to disappear after Brexit. Whilst the UK government may choose to use money previously spent on EU contributions to bring in farming subsidies of its own this is by no means a certainty. The removal of EU farming subsidies could see a tenth of all UK farms fall into the red so the issue is clearly a very important one.

Even the question of currency is up for discussion should Scotland gain independence and stay a member of the EU. Back in 2013 the SNP stated that it would continue to use sterling if Scotland gained independence in 2014. Things look very different now though. If Scotland were to leave the UK and join the EU it is likely that adoption of the Euro would be a prerequisite imposed by Brussels.

The drop in sterling’s value has already improved the fortunes of many UK businesses which export their goods, and Scottish farmers enjoyed a boost of £96 million in 2016 due to sterling’s decline. Should Scotland leave the UK and adopt the euro, however, things might not look so rosy as Scottish exports to the UK may well then seem rather expensive.

Currency risk may also come into play if Scotland left the UK and became a member of the EU. In the agriculture sector, trading decisions are often made at the start of the season but those decisions do not turn into cold hard cash until harvest time many months later. If exchange rates move dramatically in the interim farmers could be looking at heavy losses unless costly risk hedging strategies are put in place.

Of course, much of the debate is pure speculation as there is no guarantee that a newly independent Scotland would even be allowed to join the EU or have access to the single market. For Scotland to be allowed to join the EU every other member state must give its approval. Here, Spain at the very least has indicated its unease, due in large part to fears that Catalonia will seek to follow Scotland’s lead and try for independence itself.

One rather bizarre outcome then might be that Scotland could find itself leaving both the UK and the EU. Piecing together a trade deal with either could be complex, with potentially damaging consequences for Scottish cross-border trade with a bad deal.

There is no crystal ball to help us predict how Brexit will pan out. There has never been a divorce quite like this one and it could be a triumph for the UK or an unmitigated disaster. Whilst it will undoubtedly be a bumpy ride for the UK, Scotland looks set for a much more complicated journey as it tackles, once again, the issue of independence alongside Brexit. Whatever decision the Scottish people take the implications are far-reaching, especially for the agriculture sector, which relies so heavily on EU subsidies and a mobile EU labour market. The constant debate about Brexit and the merits of Scottish independence are undoubtedly having a destabilising effect, but it is to be hoped that as negotiations start to get under way in earnest Scotland’s choices will become a little clearer.

Image courtesy of Duarte JH

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About Justin Fox

As a History graduate from the University of Kent, Justin has long been fascinated by politics and current affairs. From international relations to local level elections, no topic is unworthy of analysis, thanks to the impact each has on the larger picture as a whole. He has written for numerous online publications, from personal blogs to those owned by UN agencies. Currently residing in North London.

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