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Breaking up is hard to do – what Scottish Independence could mean for UK trade

12 September 2014  
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In the countdown to the September 18 referendum, the Institute has been asked about the implications for UK trade if the people of Scotland decide to go it alone.

Our director general Lesley Batchelor has been responding to questions which are featured below.

What could the potential implications be for UK exports if Scotland severs ties with the UK?

If Scotland does choose independence, it will have to negotiate, and set up administrative and regulatory systems to govern itself, and to regulate relations with the rest of the UK and other states. Regardless of what form those regulations take, they will undoubtedly result in some administrative burdens and regulatory impact on companies, whether it is on companies who trade across the border, or Scottish companies exporting outside the UK.

It appears that, with just a week to go, no-one really knows what the full implications of a Yes vote might be?

Both sides of the campaign, and other interested parties, have made statements about what might happen in the case of a vote for independence. These statements say that an independent Scotland would not be able to use the sterling pound, or remain a member of the European Union; however, if there was a vote for independence, both parties would have to negotiate settlements which might be substantially different from the positions which both groups are currently adopting.

Any negotiations about relationships between an independent Scotland and the rest of the Union will take time, which will no doubt be exacerbated by the forthcoming UK election in 2015. Businesses throughout the UK will be subject to uncertainty until negotiations are completed, which will affect their own decision making processes. It is also possible that the negotiation process could see uncertainty on share, bond and currency markets, which would have a further negative effect for businesses across the UK, although it might “concentrate the minds” of the negotiators.

Are we talking some kind of tariff between Scotland and England?

In some circumstances there might be differentials in customs duties if an independent Scotland were to set up a separate customs administration with tariffs. However, it would probably be more likely that both parties would establish a cross border free trade agreement, either as a bi-lateral agreement between Scotland and the rest of the UK, or as part of a wider EU agreement. If any duties are introduced, they may be focused on “excise” goods, such as fuel or alcohol.

But it is not just about tariffs and duties – any “international” trade involves administrative processes which take staff time and cost money. Even when trading within the EU, which is a free trade zone, companies have to deal with VAT administrative and reporting procedures. If an independent Scotland sets up a different VAT regime, any companies trading across the border will have to set up systems to manage the administration of the VAT, causing extra costs for business.

Does the Institute take a stance on the vote for Scottish independence?

As an organisation which represents member companies based throughout the UK, including Scotland, the Institute does not take a stance on the political or social implications of the referendum; as that is an issue for the Scottish people. We would naturally prefer to see an environment where all companies can trade efficiently and without unnecessary obstacles.

You can tune into a full interview Lesley conducted with BBC Radio York on the link below http://www.bbc.co.uk/programmes/p025nd3k which starts 30 minutes into the programme featuring presenter Jonathan Cowap.

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