Press release

Cable: UK single market is key to Scotland’s future success

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The UK’s ‘true single market’ is one of the best reasons for Scotland remaining part of the UK, according to Scotland Analysis paper

The UK’s ‘true single market’ is one of the best reasons for Scotland remaining part of the UK, according to the latest Scotland Analysis paper published today.

The analysis by the UK government shows that a decision to leave the UK would create barriers that would hamper trade with the rest of the UK - which is by far Scotland’s most important market. These could also damage the prospects of the rest of the UK, for whom Scotland is currently the second largest market.

Scottish exports to the rest of the UK totalled £45.5 billion in 2011 (excluding oil and gas). This is double the levels exported to the rest of the world and four times as much as to the rest of the European Union.

The analysis explains why the UK is a single market that the EU cannot match when it comes to the free flow of goods, services, capital and people, and that joining the European Union after independence would not compensate for the loss of the UK single market. Inside Scotland’s most important market there are no internal barriers to the flow of goods, services, capital and people, whereas trade between independent nations incurs red tape and costs in areas including VAT, payment and reporting requirements.

Benefits of UK membership to Scottish firms include:

  • One, common set of business regulations that serve the entire UK market and which rank well internationally
  • An integrated infrastructure for telecommunications, broadband, postal services and transport
  • A wide UK tax base that allows for long term investment in major infrastructure projects
  • Expert and well established UK institutions that provide support for research and development, knowledge transfer and intellectual property rights
  • A common currency.

Access to this market and a highly skilled UK-wide workforce helps Scotland remain an attractive destination for Foreign Direct Investment; In 2012 Scotland secured over 10 per cent of all UK projects, and 55,000 jobs in Scotland have been created or safeguarded over the last decade.

Business Secretary Vince Cable said:

The union works for businesses on both sides of the border. Scotland is famous for its world class products and enterprising spirit – and the UK’s truly free, integrated and growing market helps Scottish firms exploit these to the full.

As the economy starts to heal, now is the time to focus on renewed opportunities to do business. The last thing firms need is a new set of rules and regulations, new costs on exports, a smaller labour market and less reliable support for innovation and knowledge transfer.

Breaking up Scotland’s most lucrative market would destabilise enterprise and potentially put growth and jobs at risk. My message to the Scottish business community is that we’re stronger and more secure together.

Among the difficulties that independence would bring to Scottish companies are:

  • Reduced access to the UK single market
  • Extra administrative burdens for companies doing cross-border trade with the UK, such as EU VAT returns
  • Two different sets of regulations including those covering, company registration, recruitment and competition for firms operating on both sides of the border
  • Extra tax and pension complications for individuals working on both sides of the border
  • Uncertainty and financial costs arising from duplicating a whole new set of regulatory bodies, and disruption caused by the transition to a new set of regulations and monitoring processes.

Smaller companies would inevitably be disproportionately impacted by these extra burdens.

David Mundell, Parliamentary under Secretary for Scotland said:

Today’s paper focuses on real businesses like those in my constituency and across Scotland. Let’s just look at the benefits that, a small family-run business in Lockerbie – so close to the border between Scotland and England – gets from being part of the United Kingdom: a UK-wide six-day-a-week postal service with uniform prices regardless of location; no charges for firms who move goods across the border on a daily basis; and no need to worry about complying with two set of business regulations.

There’s plenty of focus in this debate on how big firms like our banks and financial institutions would be affected by independence, but today’s paper makes clear that every business – large and small – and everyone who works for a business benefits from Scotland being part of the UK. Why would anyone want to increase the barriers to business? Scotland, in the UK, is open for business.

The paper also states that in the event of a vote for Scottish independence disruptions to shared institutions, communications and transport networks could burden businesses and their customers, especially those in rural areas, with higher charges and poorer services.

Scotland currently benefits from the UK’s commitment to provide broadband and mobile coverage in rural areas. Scotland is receiving more than £100 million of the £530 million UK’s Rural Broadband Programme budget. And 90 per cent of Scottish rural or small businesses rely on the UK’s mail service – and the UK government’s commitment to six-day-a-week deliveries. Replicating these services would present significant technical and funding challenges without access to UK-wide economies of scale, including access to a wide UK tax base.

The government of an independent Scottish state would have to consider how to set up and fund around 200 new institutions, including around 36 UK institutions with regulatory functions in Scotland.

For example, with intellectual property (IP) protection ranked sixth overall in the world, the UK is placed ahead of its major competitors such as Germany, France, US and Italy. Scotland benefits from this by offering one single, low-cost application through the Intellectual Property Office to all UK businesses. In the event of independence, differences between national standards and intellectual property protection could reduce trade opportunities with the continuing UK.

And businesses in Scotland currently have access to large-scale, UK-wide support for the sharing of ideas and knowledge that help businesses grow. For example, the Technology Strategy Board helps leading businesses and universities work together, to apply new knowledge and technologies and develop innovative goods and services. 879 organisations in Scotland received help or funding from the Technology Strategy Board in the last financial year. 50 per cent of these organisations are either micro, small or medium-sized companies.

Notes to Editors

  1. For a copy of the report please contact Oliver Fry, oliver.fry@bis.gsi.gov.uk

  2. Previous government papers considered currency and financial services respectively. For more information visit https://www.gov.uk/government/organisations/scotland-office/series/scotland-analysis

  3. According to the World Economic Forum, the UK ranks 13th out of 144 for the quality of its institutions.

  4. There are 24 million vehicle crossings, 7 million rail passenger journeys annually between Scotland and the rest of the UK; 16m tonnes of freight are moved by sea from Scotland’s ports to other parts of UK.

  5. The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe.

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.