Whenever Nicola Sturgeon travels abroad on official business there’s a section of the Unionist community that always responds in the same way. The First Minister is grandstanding, they say; she’s attempting to create a distinct Scottish foreign policy to the one pursued in London; she’ll bring back nothing worth having.
This week, Sturgeon has been in China, where she met Hu Chunhua, a vice-premier, and talked about advancing long-term links between the two nations. She also hosted events aimed at boosting Scottish exports, including whisky, salmon and technology. Agreements were announced between Scottish and Chinese universities in the finance, energy and video game sectors.
This is all to the good. No one should pretend that an economy the size of Scotland’s holds much interest for those running the vast and growing Chinese behemoth. In my past dealings with Chinese diplomats, even Britain’s economic heft was viewed with some disdain.
But this relationship matters to Scotland – and it, and others like it, are about to matter a very great deal more. Those Unionists who scoff at Sturgeon’s efforts on this front should, frankly, put a sock in it. Here’s why. The prospects for the Scottish economy, as things stand, are what one might call sub-optimal. Its growth rate is estimated at 0.6 per cent, compared to 1.7 per cent for the UK as a whole. Government stats show growth to be 2.7 percentage points below those classed as comparable “small EU countries”, namely Austria, Denmark, Finland, Ireland, Luxembourg, Portugal and Sweden.
An excellent and comprehensive report by the think tank Reform Scotland reveals worrying structural problems. Every English region other than the North East, has a higher number of businesses per capita than Scotland. Scotland has a particular problem with small businesses, i.e. from sole proprietorships up to those employing a maximum of 49 people.
In Scotland in 2016, there were 721 such companies for every 10,000 adults; in the North West of England there were 890; in the East, 1,122; even Wales and Northern Ireland, which typically occupy the basement of UK economic tables, were doing better than Scotland: the former with 866, the latter, 839.
Scottish start-up rates are lower than in all but one English region. Growth in the total number of private sector businesses between 2010 and 2016, at 14 per cent, was the poorest apart from Northern Ireland. The value of Scotland’s exports to the EU seems to have dropped markedly in recent years. Private sector investment in R&D is near the bottom of the UK table. More people work in the public sector as a proportion of total jobs than almost anywhere else.
This is all before the expected impact of Brexit. The devolved government’s own analysis predicts a hit to the Scottish economy of £9-12bn by 2030. It seems unlikely that such a scenario would build business confidence, encourage greater R&D spending, or help rectify the start-up gap. It certainly bodes ill for the future health of our EU export market.
And then there’s the thorny issue of immigration. It’s projected that if there is to be any population growth in Scotland over the next 25 years, it will have to come from immigration. Over the same period, the proportion of Scottish pensioners will increase by 25 per cent, and those aged 75 and over by 79 per cent. At present the UK system does not allow a region-specific approach. Given the likelihood that immigration to Britain will be cut after Brexit – that being the whole point – the outlook for Scotland’s prospects becomes even grimmer.
If Scotland continues down the path of social democracy, as seems likely, it will have to find ways to foot the rising bill beyond constant hikes in personal taxation. It will have to aggressively tackle the existing weaknesses in its economy. It will have to adapt to whatever new strains are caused by Brexit. It will have to get very serious about the condition of its economy, and especially its private sector.
Perhaps this requires the reopening of the constitutional debate – maybe not as far as independence, but certainly with a view to strengthening the Scottish government’s economic toolkit. There might be something of a UK-wide headwind here – there is a growing unhappiness at the economic dominance of London and the South East, and the Metro mayors, now in place in many of England’s largest cities, are positioning themselves to fight this centralism. Something will have to give on immigration.
There has, as far as I’m aware, been little attention paid to the economic opportunities that might come out of Brexit. There will be some, and even if they are second best to staying in the EU, it’s essential they are explored with vigour. Only a healthy and globally-focused private sector can ride to the economic rescue. For that reason, Nicola Sturgeon needs to do whatever it takes at home to cover the bills; and to ignore the critics by embracing life as a jetsetting saleswoman.
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