The Union Abacus

Disclaimer. I’m pretty much innumerate and have come to rely on my eight-year-old to work out my change in the shop. I believe in regulated markets and the incentive of reward. I believe economic exchange is a civilising influence and mankind is better for it. But I still can’t count for tuppence – or to tuppence for that matter. Therefore I am literally the last person anyone should look to for advice on numbers or economics beyond barter. It’s because of this vacuum in my learning that I’ve become puzzled by recent arguments over the viability of Scotland’s economy and future prospects.

For example, I hear that that Scotland sells £50 billions of goods and services not including oil and gas, to the rest of the UK, several times the value we export to the EU. (Therefore we’re mad to leave the UK for the EU because, presumably, we’d lose all that business as we’d no longer trade with England at all…thousands of jobs lost, companies closed, shortage of money circulating, hardship and national poverty).

So my first thought was from my history classes where it was explained that countries trade with each other – that is, they bought and sold each other’s goods. It was an exchange. Yet, no, it seems that in modern Britain that concept has been abandoned in favour of cul-de-sac trading in which goods only flow one way – Scotland sell its goods to England where they are prepared to buy them. They  don’t have to, it is implied. They can just stop, or be stopped, and that’s that. The Money Tap will be turned off and England will say: there you go, Jock.You wanted to be on your own. Now you’ve got it. See you at the Last Night of the Proms.

Well, I’m not having that. Mrs Crabtree in History did a better job than that. There MUST be trade in the opposite direction. And of course, I’m right. It’s just that trying to quantify how much is a job for a super computer.  One of you bright lot out there will have this information I’m sure and will be shaking your head at my inadequacy.  But every time I Google sentences like How much does England Sell to Scotland or English exports to Scotland etc and other variations, the links all transpose my question into Scotland exports billions into England. I assume this is because virtually all of the articles ever written are asked on that same one-way assumption – England buys from us. English money pays for Scottish goods. England has economic power over Scots.

So I emailed  the government, I asked a professor of economics – and I drew a blank. Where can be found this tantalising answer? And if it’s so hard, how come everybody from Jackie Baillie to Gordon Brown to Lulu can tell you exactly how much flows the other way? Are you getting suspicious?

You see we hear we have a massive unsustainable deficit that can only be  handled, like the oil industry, by clever folk in Whitehall wether it was incurred under their stewardship or not. Now we are told that the bulk of trade is also utterly dependent on the largesse of good English people, a benevolence that will be terminated if we get above ourselves and try to do things for ourselves.

We have got ourselves into a right mess, haven’t we? As Melanie Reid wrote in the Times…’spoilt, selfish, child-like fools’. Us Scots, eh? What are we like?

Then  I came across Scoland’s Global Connections Survey published by the government (ours) in 2014. Amid  it’s morass of numbers it makes clear it is, as it says, just a survey so it is not definitive. It is voluntary exercise so a few thousand firms were asked to estimate their sales and just over 2000 companies responded. Adding to the vagueness of the findings are the following sentences.

Issues with the organisational structure of the company refer to situations where companies are part of large international corporations, possibly functioning as a subsidiary or a franchise operation within Scotland. The Scottish part of the business may not know the sales figures or be able to split Scottish figures from the UK company account or be able to influence the company strategy for exporting. Furthermore, some companies use separate distributors to exports goods, who work independently.

Thirty one companies mentioned how difficult it was to split Scottish sales from UK sales or had difficulty determining visitor’s normal place of residence (particularly for the retail and hospitality sectors). For those companies having difficulty splitting Scottish sales from UK sales, this was mostly because accounting was done at a UK level.

Trying to identify accurate figures for trade in goods and services within the UK is notoriously  circumspect. It doesn’t mean Scotland isn’t indebted to English consumers.  We just don’t appear to know with the kind of precision that allows one side of the argument to state with conviction how much that is.

With a little further digging I came across an unimpeachable source, one I know you will all endorse – BBC Scotland. When  the survey was published the Beeb ‘s report produced a figure for English sales into Scotland, one I have to confess I can’t locate in the document myself. (Must ask my eight-year-old)

They claimed to find that Scotland sells £50 billion to the rUK (mostly England) but they, the rest of the UK, sell £62 billion to us. £62billion! They sell more to us than we do to them. I just asked my eight-year-old and she says that’s about 25 per cent more than we sell to them. Suddenly it looks rather different, doesn’t it? It means we too have a money tap of our own and, if we’re playing silly games over trade, well, we can threaten to stop buying English  goods. It may not be as high a percentage of their exported goods as £50b is of ours, but it’s still a stonking amount of trade that England won’t want to lose.

Look at it another way, between us we have £110billion pounds of mutual business and somehow we’re supposed to believe it is either going to stop altogether or will be so degraded by borders and imports that it will slide away in to nothingness. A mythical border will eliminate all trade.

As I said at the start, I believe in markets and the incentive of economic exchange. Transposed on to this cross-border conundrum, it means I don’t see thousands of businesses allowing this to happen or indeed governments letting the tax revenue stop or accepting the closures and unemployment that would follow. To go further, in my experience businesses will sell to whoever has the money to pay and no questions asked. They won’t be prevented by a political border.

Now it’s true that a border in a different jurisdiction can mean checks, delays or tariffs. And that can be a drag on business, if a long way from elimination. But none of that is insurmountable and no one is going  to give up on sales that have been long established just out of political disagreement. Heaven and earth will be moved to keep trade flowing within the British Isles whatever decisions are made on EU membership. The Commission would meet with a very tough response if it tried to impose heavy duty on trade between Scotland and England. And of course there is a way out, proposed by the UK itself. Britain doesn’t want a hard border with the Republic, something that would severely weaken the EU’s legitimacy were it to insist since peace is enshrined in the EU treaty detail. Can either the UK or the EU seriously argue in light of that they can still impose such a border on Scotland and England with £100billion of business at stake? The Common Travel Area provides another template for progress allowing a distinct and tailored solution for a particular problem withinin the archipelago.

This is one of those areas where common sense tells you there is a solution, one that not only can effectively guarantee cross border  trade but, with independence, can grow Scotland’s connection directly with our European neighbours. One reason we haven’t been able to export more is explained in the paragraphs above about the interlinking of company ownership and accounts that concentrates exports in English ports and airports. Doing it for ourselves obliges us to engineer new contacts, new ferry routes and air routes and promotes Scotland and her produce without a UK middleman. If there is a chance of bigger markets through the EU, how many companies already got trading with Scotland will take the decision to move here and use Scotland as the platform for an EU export drive?

The fundamental point is that we trade with each other and that is destined to continue out of both economic and political necessity. Scotland holds key cards of its own. The Euro separatists are being  disingenuous if not downright dishonest and this is just the latest barb from Project Fear.

When next you’re told we’d lose £50 billion trade with England in an EU Indy Scotland, tell them : Aye. But you’d lose £60 billion. If you’re daft enough…

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28 thoughts on “The Union Abacus

  1. Brilliant! Another doom and gloom prediction discredited. The trouble is some people believe what they want to believe – no matter how ridiculous it is.

  2. Derek, Quite right. Trade will continue as there is a mutual benefit. Project Fear must think we are stupid. However, I do think we need to be better at quickly and consistently debunking these lies.

    We need a rebuttal team to get out the facts or even better to already have the information published prior to the latest lies being thrown at us by Project Fear.

    Like some others I also feel some SNP spokespersons need better training in how to deal with hostile interviews and have the rebuttal information at their fingertips.

    • Agreed I am still seeing myths that surfaced in the run up to the 2014 referendum, The most prominent one being ” you will be forced to use the Euro ” This junk is so simply explained I really thought it had went away, just more repetitive regurgitated tosh by a lazy media , Ok the Unionists control the media that’s without Question however the SNP being as they are the Scottish government they get some exposure, Why are they not using the little exposure they do have to better effect , they need to be more inventive, and a good deal quicker of the mark , this is a one shot game and events out with our control have brought us to this point.

  3. Another important factor is how many Scottish exports are conveyed via English ports – this is obvious on any journey to or from the south of England, with main roads clogged with Scottish lorries making the long and unnecessary trip to English ports. Independence gives us the opportunity to reinstate ports and ferry routes that were discontinued long ago and become the important European hub we should always have been. Not to mention the opportunities in the north with the opening up of the Northwest Passage!

    • Thanks, Anne. You saved my from having to write. I agree 100% with what you say.

    • It’s been raised before – how much of Scottish ‘exports’ to England are actual exports to England and how much is simply in transit to EU?

      West coast oysters, lobsters, salmon… food is a major export but it all goes via England to EU.

    • Absolutely right Anne Bruce. For the reasons you cite – as well as the accountancy provisions mentioned by Derek even Scotch Whisky – yes Scotch – is mostly counted as an ENGLISH export.

      I strongy suspect that the reasons for the ‘inability’ to disaggregate Scottish from English export figures is no accident – and is deeply political.

      Just as the fact that the Whitehall treasury covered up the true value of oil exports going to the English exchequer – whilst also re-drawing the maritime border between Scotland and England (to the benefit of guess who?)

  4. Pretty much Derek.

    Personally I’d love to be in the room when any PM has to tell the leaders of the business community it shouldn’t trade with or sell to Scotland because….

    I’m sure it would go down a hoot. 😀

  5. State of Play

    Below is a list showcasing 15 of United Kingdom’s top trading partners in terms of export sales. That is, these are countries that imported the most UK shipments by dollar value during 2016. Also shown is each import country’s percentage of total UK exports.

    1.United States: US$60.4 billion (14.8% of total UK exports)
    2.Germany: $43.6 billion (10.7%)
    3.France: $25.9 billion (6.3%)
    4.Netherlands: $25.6 billion (6.3%)
    5.Ireland: $22.9 billion (5.6%)
    6.Switzerland: $18.9 billion (4.6%)
    7.China: $18 billion (4.4%)
    8.Belgium: $15.8 billion (3.9%)
    9.Italy: $13.1 billion (3.2%)
    10.Spain: $12.7 billion (3.1%)
    11.United Arab Emirates: $9 billion (2.2%)
    12.Hong Kong: $8.8 billion (2.2%)
    13.Japan: $6.4 billion (1.6%)
    14.Canada: $6.2 billion (1.5%)
    15.Sweden: $6.1 billion (1.5%)

    Approaching three-quarters (71.7%) of UK exports in 2016 were delivered to the above 15 trade partners.
    Overall, the UK incurred a -$227.2 billion deficit during 2016 up by 18.1% from -$192.4 in 2009 when the Global Recession first clicked in.

    In 2016, United Kingdom incurred the highest trade deficits with the following countries:

    1.Germany: -US$42.7 billion (country-specific trade deficit in 2016)
    2.China: -$40.9 billion
    3.Netherlands: -$20.8 billion
    4.Belgium: -$15.8 billion
    5.Norway: -$13.2 billion
    6.Italy: -$10.2 billion
    7.Switzerland: -$9.7 billion
    8.Spain: -$9 billion
    9.Canada: -$7.4 billion
    10.France: -$7.3 billion

    These figures indicate that Scotland is England’s largest export destination. They also indicate how important Ireland is to the English economy. Ireland is England’s 5th largest export market but the trade deficit is minimal.

    It would be really useful to know what percentage of these trade deficits was due to England and Scotland.
    Scotland probably has an overall trade surplus whereas it is England that has the massive trade deficit.

  6. This is a drum I’ve been banging for years, but surely I’m not the only person to notice this elephant in the room: where is the moral case for the union?

    Amidst all the blather and flannel about GERS, EU membership, indy Scotland can’t do this, that, and anything else, I have yet to see a Unionist defend the union without reference to indy Scotland’s finances…

    This is a remarkable state of affairs. Where are the tub thumping unionists appealing to the heart, not the head? Such a state of affairs would have been unthinkable years ago. Alarm bells should have been ringing after September 2014, but nary a finger has been lifted to make the moral case for the Union…

    I can only conclude that there is no moral case for the union, that UK plc is intellectually and morally bankrupt, and a sure sign of the last days of the UK…

    • The one simple act that would have made another referendum very very difficult to call for was , The love and promises indeed the VOW was actually Honestly Honoured ,The media continually pushed vote NO and this happens, Well we know nothing like what was presented was actually delivered and they even at this point they still shout about all these new powers, What f/in powers ? Were we out when they were delivered ? Will they try and deliver at a later date, will we have to go and collect them.
      David Cameron only Hours after the referendum result with his EVEL statement made it perfectly clear you mugs have voted NO , now I will tell you what is going to happen, then we witnessed every single amendment voted down in the English parliament by MPs who probably half pissed and couldn’t be bothered being present during the debates magically appeared only to vote everything down, the repetitive announcements of the NOs have it the Nos have it went on and on .

      And this lot who indignantly say you have had your say now shut up ,seem so surprised when the people here who have worked out we were well and truly stuffed, We aren’t asking for another vote We are demanding one.

  7. This is a great answer you’ve given us. Thanks! And the doom-mongers don’t pull together parallel with rUK ceasing to trade with France or Germany following Brexit. How would that be different? Can your eight-year old work out what that would mean in lost trade when the drawbridges go up?

  8. I think the UK and Bitter Together’s point is about the relative size of the two economies.

    England may well sell £62 billion to us and we £50 billion to them (making a balance of trade in our favour) but at the end of the day that £62 billion will be a smaller portion of total English exports than our £50 billion is of our total exports.

    So in any Mexican stand off, England can afford to say stuff it, and we, apparently, can’t.

    HOWEVER, you are perfectly correct that the response of the wee guy in England who wants to get his goods to a Scottish customer (or any customer, given Brexit) isn’t necessarily going to obey, or be happy about having to obey.

    It was on account of this integration between the two country’s that Joseph Stiglitz proposed a currency union. This would have worked well, even Mark Carney sais so.

    But it needed political agreement and George Osborne said get lost.

    Never underestimate the willingness of a Tory government to cut its nose off to spite its face: witness, Brexit.

  9. Mayhem’s speech in Ireland spoke of the trade between the UK and Ireland €1.2B/week. The trade between the rUK and Scotland is twice the amount, about €2.4B/week.

    From her own mouth –
    https://youtu.be/094XoU1RiZw?t=298

  10. Jimmy The Pict

    The matter gets even more complicated by Scottish produce (e.g. potatoes) going to packaging and distribution centre in England to be sent back to supermarkets in Scotland as “Scottish Potatoes”.

    If there is a hard border expect more Scottish distribution centres to open up as no company would want to pay twice to sell local produce locally.

  11. Gavin C Barrie

    The old colonial trick – buy produce in bulk, take the purchase back to base, package it sweetly, apply marketing skills,and export it, including to the producer nation’s population.

    GERS – does anyone believe that the estimates used are credible? To Scotland’s favour?

    The income generated from N Sea oil and gas, and now West of Shetland is declared “ex regio”, and so not credited to Scotland’s trading account, goes direct to the UK Treasury. In the recent trading period the UK reported N Sea hydrocarbons income down to just several thousands, Norway declared +£10 billion income from similar production levels. Eh?

    Scotland exports power to the rest of the UK, is income to Scotland reported in GERS? Aye Right. You may recall that Scotland’s power producers are charged to access the National Grid, Southern England producers receive subsidies.

    Rule 1: Do not believe a word uttered by the UK government, matters and relations are going to worsen, as the UK grasps the bleakness of Brexit and Unionists will increasingly avoid statistics and resort to ridicule and insults in their desperation.

    “They would say that wouldn’t they?”. Mandy Rice Davies(?), of her elite clients, way back in time.

  12. Very welcome information, Derek. Thank you.

  13. As I said in response to Gordon in your previous post – why uniquely would rUK refuse to trade with an indy Scotland when it’s clearly beneficial to both?

    Mind you, I wouldn’t put it past the current Government at Westminster to cut off its nose to spite its face – after all this is exactly what a “hard Brexit” will entail is it not?

  14. Bill McDermott

    The problem for Westminster is that it can’t have it both ways. May states baldly that she will get the ‘best deal’ for Britain with the EU. That being the case and a Scottish government being in the EU, those same terms will apply between Scotland and England as they would do across the EU. For Westminster to renege on that would be a case of see you in court.

  15. Glad you quoted Melanie Reid’s comments referring to Scots as spoilt children. Another annoying English person living here thinking she knows best and looking down her nose at us. I used to work with her at The Herald so know her well.

  16. excellent again. and a big high five to your daughter for ‘about 25%’ from me

  17. Thank you derek…puts a perspective on the project fear mark 2 nonsense spouted by an uber unionist relative of mine who is giving out the doom and gloom scenario if we went for self governance…we wouldn’t manage, terminal decline, Greece without the sun, had it all ad nauseum ……convinced the unionist silent majority will prevail again and increase their support, crushing our aspirations..it’s desperate stuff…who wants to be ruled by fear, contempt and condescending attitudes they espouse, rather than self governance…..shame as our debates and trading alternative views during indy 1 were amicable mostly…now is barracking and hectoring over any word that I can get in edge ways…sensing Scotland’s tectonic plates shifting towards yes might be the reason…

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