In the wake of the British vote to leave the European Union the Scottish First Minister has engaged with the broadcast and press media to threaten to take Scotland into a referendum to allow the nation to leave the United Kingdom and join the EU. This is an empty gesture and posturing by the ruling SNP to try to turn the Scottish dissatisfaction with the Brexit vote into a greater power for the SNP.
There are many reasons why the Scots might want to be independent but only one answer to this burning question. The answer is that if Scotland became independent it would be bankrupt in less than four months. The Scottish economy is a rather steep decline and has been so for several years. In the wake of the collapse of oil prices the Scottish GNP has declined and the country's trade balance and tax revenues as a whole has also been badly hit in addition to the decline in oil prices. At the time of the last Scottish referendum the SNP promoted itself as being economically self-sufficient. The SNP based its forecasts on oil at $110 a barrel and an income of 7.5 billion a year to the Scottish treasury. With the oil price having fallen to less than half that, and with oil revenues now about 35 million, this is the reality that the SNP refuses to face.
In a June 2016 report of the Scottish economy [i] , experts gave their overview. "In the latest Economic Commentary we note that Scotland's economy has recently flirted with recession with growth of 0.2% in 2015q4 -- the latest data point -- and
-0.1% in 2015q3. Scotland may yet fail to escape recession in the coming months as growth is set to slow further due to
slow investment growth,
the continuing effects of the fall in the price of oil on household incomes and spending,
a general slowing in household spending as the rate of household borrowing diminishes, wage income growth is weak, increasing job losses, and house price growth is moderating; and
a worsening demand for Scottish exports as global growth and growth in Scotland's key export markets slows."
Their view of the Scottish labour market was equally dire. "The latest labour market data revealed a significant deterioration in performance as the job shedding associated with the consequences of the oil price fall and deteriorating export performance began to bite.
In the quarter to March 2016 the numbers in work fell by 53,000 (-2.0%) to 2,578,000. The last time there was a fall in jobs of this scale was back in early 2010.
Unemployment rose by 8,000 (+4.8%) to 169,000 with the rate rising to 6.2%, compared to 5.1% in the UK, a gap that is now the largest since mid-2004. Over the year, Scottish jobs fell by -45,000, a fall of -1.7%. Unemployment in Scotland rose by 2,000 over the year, or by 1%.
The numbers inactive rose in Scotland in the quarter by 49,000 or by 3.1%, while over the year, inactive numbers rose by 59,000 (3.7%) in Scotland.
As a result of this downturn in the labour market, by the end of the first three months of this year the gap between Scotland's and the UK's employment performance had widened considerably with Scottish jobs as reported in the LFS household surveys 0.9% above their pre-recession peak, compared to UK jobs which were 6.3% above peak." [ii]
Even in the run up to the recent Holyrood election (for the Scottish Parliament), the decline in the Scottish economy was a factor in the inability of the SNP to keep its majority. The SNP won only 46.5% of the seats and garnered 41.7% of the electorate. Scotland's Nationalists like the idea of divergence from the rest of the UK -- but not of the sort displayed by data showing the Scottish economy growing just a quarter as fast as the UK as a whole. Third-quarter gross domestic product data posed many questions about the resilience of Scotland's economy. The SNP has not raised the prosperity of Scotland and has proved inept and incompetent in proposing a program of economic prosperity that has any chance of success. That is why it is banging on about its only appeal as a political party -- independence. This has such an emotional appeal to the Scottish voters that mere incompetence, lack of vision, and prevaricating and pretence by the SNP is overlooked.
The North Sea oil industry is in rapid decline. The North Sea oil and gas industry will lose a total of 120,000 jobs by the end of this year as a result of the market downturn. Last year the number of jobs supported by the UK's oil and gas industry fell by an estimated 84,000 to around 370,000, and are forecast to fall a further 40,000 by the end of this year. Companies across the breadth of the industry have been forced to make deep cuts to their job numbers in order to shore-up market-weakened balance sheets. The UK's largest oil companies, including Shell and BP, have posted record losses in the last year while smaller explorers wrestle with debilitating debt and the looming threat of insolvency. The risks facing oilfield service companies are particularly large because they rely on contracts with the cash-strapped producers for their own income. Advisory firm EY warned that a third of oilfield service firms could be wiped out from the sector by the end of the year as oil producers pull back from uneconomic ventures. Investment is expected to fall by almost 90pc this year as companies continue to slash spending and profitability has plunged to lows not seen since 1997. The Office for National Statistics shows that explorers active in the UK Continental Shelf (UKCS) have seen the rate of return on their investments become negative numbers. [iii]