when Scotland leaves

I did a post last week trying to identify what sort of scenario work had been published assessing the likely impact of Scotland withdrawing from the UK. There wasn’t all that much – but I had missed an interesting bit of work which wikistrat had done in the summer and which led to a short report issued earlier this month with the catchy title - When Scotland Leaves the UK

The lead analyst for this was one Catalina Tully who has a post today which describes how she has turned from a no to a yes. Which is why I find the conclusion rather interesting.

The methodology

In June and July 2014, Wikistrat ran a 15-day crowdsourced simulation to explore pathways for Scotland’s emergence as an independent country, assuming Scotland becomes independent within the next five years. The purpose of the simulation was to portray Scotland’s possible future as an independent state. The simulation, which was conducted over three phases, focused on the opportunities and risks (economic, political and social) that will shape an independent Scotland in 2020.
In Phase I, Wikistrat analysts identified 34 risk factors that threaten the future of an independent Scotland and opportunities available to the new country. In Phase II, analysts developed 25 scenarios based on these risks and opportunities to show different ways in which an independent Scotland may emerge. Finally, in Phase III, analysts developed 15 scenarios that described what an independent Scotland would look like in 2020.

Only four are however (rather briefly) identified in the report whose stark conclusion makes interesting reading -  

Scottish independence offers a modest upside risk and a potentially calamitous downside risk. Scottish independence also rests on several key assumptions that are at best debatable:
• Scotland being able to use the British pound as its currency.
• Scotland being accepted into the EU rapidly and under favourable terms.
• Scotland being able to benefit from NATO protection with a minimal military contribution under an Irish model while maintaining a non-nuclear policy with respect to the British nuclear submarine fleet.
• The costs of running its own government not exceeding the excess tax revenues generated from offshore energy and the contribution it once made to U.K. governance.

The SNP has also inflated the benefits and understated some of the costs of independence. Scotland will probably not realize all the economic benefits of independence when its monetary policy is controlled either in London or Frankfurt, both of which are likely to pursue austere monetary policies that put a drag on Scottish growth.

In addition, the administrative and bureaucratic drag on the economy is probably underestimated. Scotland will assume numerous sovereign rights from Britain, which will take time to sort out and administer. Preeminent among these are border control and immigration. Also, Scotland’s population skews old and its energy revenues are expected to decline. Thus, its prosperity depends on the country’s ability to attract and absorb younger immigrants, which, depending on where the immigrants come from, could profoundly change the country’s character.
 Much of Scotland’s economy depends on protecting its maritime interests, especially its offshore energy extraction and fishing industries. Protecting its Exclusive Economic Zone will be costly and could become more expensive under the terms for joining the NATO alliance. Given worsening ties with Russia, however, EU member states might welcome Scotland as a member on favourable terms, given its oil and gas resources and strategic North Sea location. NATO may view Scotland in the same light.