Voters in the United Kingdom may decide to break away from the European Union on June 23, 2016, and deal a crushing blow to the concept of European political unity. The landmark referendum is divided between those in the “Remain” camp and the “Leave” camp, with much of the early polling showing a divided Britain. At stake are many of the economic and political relationships between the United Kingdom and the rest of Europe, but there are also concerns that a “Brexit” (British Exit) could reignite some long-standing regional politics inside the United Kingdom.
In other words, some of the other member states within the United Kingdom (Scotland, Wales and Northern Ireland) might decide to use Brexit as a jumping-off point for their own independence. An independent Scotland or Wales, for example, might decide to rejoin the EU, cutting ties with England along the way. British Prime Minister David Cameron, an opponent of Brexit, openly worries that a Leave vote could threaten the unity of the United Kingdom.
Economics of Brexit
One common argument in the United Kingdom is that EU membership has been a net drag on the U.K. economy, because taxpayers in Britain send more money to Brussels, where the EU is headquartered, than the value of the services provided from the EU. The Leave camp believes that Britain can be more prosperous and free if it escapes from the regulatory and bureaucratic pressures of Brussels. After all, member states of the EU trade amongst one another without tariffs or other barriers, and virtually all economists agree that free trade promotes economic growth.
However, trade agreements do not have to be bilateral in order for one party to benefit from free trade. History has shown that countries that enact free trade agreements benefit, even if their trading partners impose high tariffs or other restrictions. Hong Kong, an old British satellite, is an excellent example. The United Kingdom might still remain an international trading power outside of the EU simply by retaining and reinforcing its own free trade tendencies.
The International Monetary Fund (IMF) has consistently issued warnings that a Leave vote could threaten the financial stability of European markets and add to heightened uncertainty for investors and businesses. However, this could be seen as propaganda from the rest of the European Union or from economists who have long touted the viability of the EU framework.
Even if EU membership is disadvantaged for London, it does not necessarily follow that leaving is good for the rest of the United Kingdom. The individual economies of Scotland, Wales and Northern Ireland appear to have benefited from pre-allocated European funds and access to European markets without interference from Whitehall.
Scotland, Wales Rely on English Trade and EU Support
The same economic concerns working against Brexit could also work against a reunited effort for Scottish independence. England is by far Scotland's largest trading partner, and Scotland uses the British pound sterling as its currency. Additionally, public sentiment for independence in Scotland appears to have waned since the price of oil collapsed shortly after the first referendum.
Lack of oil revenues damaged the perception that Scotland could survive economically as an independent country. Whatever the Scottish sentiment about membership in the United Kingdom, Scottish leaders must carefully evaluate the potential economic repercussions of independence.
The same is clearly true for Wales, which is also heavily reliant on financial aid from the United Kingdom and the EU. Wales is an economically poor region and typically receives the highest levels of EU support, including a large chunk to Welsh farms from the Common Agricultural Policy (CAP). Most British officials do not consider a Welsh independence movement as a serious threat, however, because Welsh culture feels less at odds with Westminster and because Wales appears less economically viable on its own.
Another Referendum for Scottish Independence?
In September 2014, the Scottish voters held a referendum about whether or not to stay as part of the United Kingdom or declare independence. In a 55% to 45% vote, the Scots decided to stay. In fact, one of the primary arguments against Scottish independence in 2014 was that it could jeopardize Scotland's membership with the EU.
During a 2016 Sky News debate, David Cameron indicated that Brexit could create a second push for Scottish independence. It is a little ironic that more Scots might support staying in the European Union than staying as part of the United Kingdom. This may amount to something of an admission that the Scots prefer to relegate some sovereignty to Brussels rather than to London.
The current dominant party in Scotland, the Scottish National Party (SNP), argues that the Scottish Parliament has the right to hold another referendum if it believes there have been “material changes in the circumstances” between Scotland and England. Brexit could be one such event. Former SNP leader Alex Salmond floated the possibility of a second referendum within two years of a Brexit.
It is not that simple, however. The first Scottish Independence Referendum Bill only reached a vote after an agreement between the U.K. government and the Scottish Parliament. It is not clear whether the U.K. government might produce another such agreement. If not, any Scottish movement for a second independence vote might face challenges. The governing legislation for Scotland's Parliament says it may not pass any laws regarding domestic authority or foreign policy without consent from the U.K. Parliament.
Could Independent Scotland or Wales Join EU?
If the UK leaves the EU, and either Scotland or Wales declares independence from the United Kingdom, it is not clear if an independent Scotland or Wales could remain in the EU. Many EU member nations generally oppose the admission of new countries. Even if they could join the EU, it is very unlikely that Scotland or Wales could retain the pound as its currency. If either newly sovereign country were forced to switch from the pound to the euro, it is uncertain what economic fallout might ensue.
Chances of Scotland or Wales Leaving
Despite occasional heated rhetoric, Brexit might not represent the catastrophic economic event as portrayed by those in the Remain camp. Simulations from the British Treasury suggest recession and higher inflation, but only if there are no policy changes after leaving the EU. It seems more likely that U.K. officials could push pro-growth policies and regulatory changes to offset any loss of EU membership benefits.
Economic policies and other political concessions could also conceivably be used to preserve the United Kingdom. If the United Kingdom really wants to leave the EU without losing Scotland and Wales (or even Northern Ireland), the government could enact changes to appease them.
Even without serious structural or economic reform, there is underwhelming evidence that the Welsh are seriously desirous of independence in 2016. Scotland is more of a wild card, especially if the SNP begins stirring, but it may likely be years before a serious effort could be mustered.
