The economic challenges are of the main consequences of Brexit. Scotland, which has planned for independence from the UK, is one of the countries which will suffer the most economic damage as a result of Brexit.
In this article, we intend to analyse and predict the negative effects of Brexit on the economy and flow of investment in Scotland in 2021.
An Overview of Scotland’s Economy Affected by Brexit
Scotland has experienced a number of economic problems in recent years with London’s decision to leave the EU.
The country’s slow economic growth in 2019 and 2020, while Brexit had not yet taken place, worried the government about the economic situation in 2021.
According to the Treasury Secretary, Edinburgh predicted from the outset that Brexit would damage Scotland’s economy.
The results of a forecast made by the Scottish Government and published on its official website show that the petrochemical plant is one of the sectors which will suffer the most damage as a result of Brexit.
The country’s food and beverage sector will also suffer at least twice as much as that in London. The government is already concerned about the import of foodstuffs and medicine into the country and is waiting for the details of the agreement promised by Boris Johnson to be implemented.
In addition to petrochemicals and foodstuffs, other sectors in the economy, such as the productive industries, tourism, energy and financial services, are expected to face difficult challenges.
But even a trade deal will not help much in improving the damages of leaving the EU. Given Scotland’s slowdown in economic growth in 2019, which was around 0.9%, and the continuation of this decline in 2020, it is predicted that the situation will be much more complicated and difficult in 2021.
Brexit and Reduced Per Capita Income
The devaluation of the pound as a result of Brexit is one of the most important concerns of the Sturgeon government.
They know that this devaluation will cause irreparable damage to the Scottish economy. One of the biggest blows will be a decline in income.
The government has predicted that even with a free trade deal, Scotland’s per capita income will fall around 1,600 pounds per person.
The devaluation of the national currency, along with the slowdown in economic growth, will also lead to higher inflation.
According to statistics, about 16.9% of the Scottish population has a low per capita income. This segment of the population will be the biggest concern of the Scottish Government this year due to the levels of pressure it will suffer. Most of the damage will be done to this segment due to a drop in incomes and wages, as well as reduced purchasing power.
As a result, the Scottish Government will have to spend more on support and social services. The decline in economic growth and government revenue, along with increasing pressures on this segment of society, is a major cause of concern for Sturgeon. The Scottish Government looks set to work hard to manage the economy in 2021.
Import and Export
Trade tariffs and the ambiguity of the import and export situation after Brexit have confused this part of the economy.
It is not yet clear how trade tariffs will affect imported goods. But even with tariff-free trade, imports and exports will suffer heavy losses given the pound’s devaluation.
On the other hand, we are already seeing a decline in trade between Edinburgh and London as the national currency depreciates across the UK. Given the fact that the UK is Scotland’s major trading market, this decline will be a serious challenge for traders.
Of course, Scotland prefers to have free access to a market which is eight times larger than the UK market by joining the EU. Sturgeon is well aware that the best option for Scotland right now is to stay in the EU and work with Europe.
A slowdown and fragility in economic growth has led to growing uncertainty and reduced investment in the country.
A combination of these factors has given the Scottish Government a strong incentive to seek independence from Britain and to rejoin the EU.
Brexit also means a massive exclusion of the UK from the long-term, low-interest loan system. Depriving the UK from this advantage of membership in the EU is tantamount to reducing investment in manufacturing projects and infrastructure.
Without financial and banking support, investors will have little incentive to put money in key industries; this will negatively affect the growth of industries in Scotland or even the delivery time of current projects.
Research by the British economic committees has shown that high trade tariffs will have a profound effect on the growth of Scottish cities and investment flows.
Aberdeen, Dundee, Edinburgh and Glasgow are among the cities which will experience economic hardship. These cities are predicted to experience reduction in growth by an average of 1.5-4%.
Brexit will have irreparable consequences for Scotland, together with the political implications and new issues it will create for Scotland internationally.
Given these facts, the current decision of the Scottish Government to become independent from the UK seems to be a logical one.
However, it seems that Sturgeon is waiting for the results of the May 2021 elections in order to make the right decision and put forward the idea of independence from the UK and re-membership in the EU.