Economic Impact of Brexit on Scotland and Northern Ireland
Economic Impact of Brexit
One of the most recurring topics we hear on the news is Brexit. One would have thought that the split would have occurred immediately after the vote. However, it is not as simple as it sounds.
The referendum on whether to leave or stay in the European Union (EU) took place in 2016, in which more people voted to leave than to stay. So, why hasn’t the UK left the EU yet? The Union among the European countries has been getting stronger over the decades, and it takes time to loosen the bonds. The laws and bills passed over the past few decades involve the entire EU and European Economic Commission (EEC) members. Hence, lots of details must be ironed out before the split takes place. Britain Officially left the EU on 31/01/2020 and is now in the 11 month transition period (1).
The major impact of the Brexit is on those who voted to remain in the Union. The vote is controversial since the results did not give exclusive results for one side. Instead, the feelings were mixed, and the results are inconclusive. Out of the total population, only 52% of the citizens voted to leave, which means that 48% of the voters wanted to stay and are now unhappy. Upon further analysis, only England and Wales had voted to leave, while the Scottish and Irish have chosen to remain in the EU with 62% and 56% in favour.
Northern Ireland suffers the most from this since it does no share a land border with Great Britain, but rather with the Republic of Ireland, an EU member. Even though Northern Ireland is not in the Schengen region, it allows free movement of people into the region so as to not have a hard border with the rest of Ireland.
Source: NY Times
Brexit has led to the exclusion of the UK from the free trade movement with the rest of the EU. So, Northern Ireland must decide between having free trade with Great Britain and the Republic of Ireland. Recently, it has agreed to maintain free trade with its southern neighbour, which means that VAT will be applicable for its trade with Great Britain. This deviated from the previously used single market system and increases complexities within the country. It is anticipated that they would be around % reduction in the GDP of the region once the country leaves the EU.
Northern Ireland is heavily dependent on both Ireland and Great Britain for its trade. Its trade dependence is below the rest of the UK. Comparatively, they are more dependent on Ireland. Hence they have decided to keep open trade with Ireland rather than Great Britain.
Scotland is one other country that voted to stay in the EU (2). Even the government does not want to leave the EU and has been pressuring the UK for a second referendum. The other option is to leave the UK and join the EU as a separate sovereign country. However, it would have to call an independence referendum for this (3) This is extremely difficult since most Scottish want to remain in the UK and also in the EU. The Scottish Union with the UK took place more than 300 years ago and has remained a single country since then with both local and central parliaments.
The economic impacts of Brexit are high for not only these countries, but for the whole UK. There are negative impacts in the long run. There would be job losses of around 15,000 for the UK youth. This is because the British would be considered foreign citizens rather than EU citizens; hence, they would have to compete with other foreign countries for jobs in the EU. The UK heavily trades with the rest of EU, especially England and Wales.
Northern Island has comparatively more trade with the Republic of Ireland than mainland EU since most of the trade with the EU takes place through the Republic of Ireland. The Belfast agreement of 1998 has greatly increased the trade between the two regions, and Northern Ireland has a trade surplus with its southern neighbour.
There isn’t much time left, and there would be multiple rounds of negotiations with the other members of the Union. UK must now decide what kind of trade deal must be fixed with the EU. In cooperation with the EU on security, law enforcement and other existing bills must be sorted out quickly. The type of deal will significantly affect the future economy; hence careful planning must be carried out.