Who’s kidding who on two way trade with England?

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Derek Bateman goes in search of facts on Scotland’s supposed trade deficit with England and what might happen in the event of independence.

Disclaimer. I’m pretty much innumerate and have come to rely on my eight-year-old to work out my change in the shop. I believe in regulated markets and the incentive of reward. I believe economic exchange is a civilising influence and mankind is better for it.

Derek Bateman

But I still can’t count for tuppence – or to tuppence for that matter. Therefore I am literally the last person anyone should look to for advice on numbers or economics beyond barter. It’s because of this vacuum in my learning that I’ve become puzzled by recent arguments over the viability of Scotland’s economy and future prospects.

For example, I hear that that Scotland sells £50 billion of goods and services – not including oil and gas – to the rest of the UK, several times the value we export to the EU. (Therefore we’re mad to leave the UK for the EU because, presumably, we’d lose all that business as we’d no longer trade with England at all…thousands of jobs lost, companies closed, shortage of money circulating, hardship and national poverty).

GOODS

So my first thought was from my history classes where it was explained that countries trade with each other – that is, they bought and sold each other’s goods. It was an exchange. Yet, no, it seems that in modern Britain that concept has been abandoned in favour of cul-de-sac trading in which goods only flow one way – Scotland sells its goods to England where they are prepared to buy them. They don’t have to, it is implied. They can just stop, or be stopped, and that’s that. The Money Tap will be turned off and England will say: there you go, Jock. You wanted to be on your own. Now you’ve got it. See you at the Last Night of the Proms.

Well, I’m not having that. Mrs Crabtree in History did a better job than that. There MUST be trade in the opposite direction. And of course, I’m right. It’s just that trying to quantify how much is a job for a super computer.  One of you bright lot out there will have this information I’m sure and will be shaking your head at my inadequacy. But every time I Google sentences like How much does England Sell to Scotland or English exports to Scotland etc and other variations, the links all transpose my question into Scotland exports billions into England. I assume this is because virtually all of the articles ever written are asked on that same one-way assumption – England buys from us. English money pays for Scottish goods. England has economic power over Scots.

So I emailed  the government, I asked a professor of economics – and I drew a blank. Where can be found this tantalising answer? And if it’s so hard, how come everybody from Jackie Baillie to Gordon Brown to Lulu can tell you exactly how much flows the other way? Are you getting suspicious?

STEWARDSHIP

You see we hear we have a massive unsustainable deficit that can only be handled, like the oil industry, by clever folk in Whitehall wether it was incurred under their stewardship or not. Now we are told that the bulk of trade is also utterly dependent on the largesse of good English people, a benevolence that will be terminated if we get above ourselves and try to do things for ourselves.

We have got ourselves into a right mess, haven’t we? As Melanie Reid wrote in The Times…’spoilt, selfish, child-like fools’. Us Scots, eh? What are we like?

Then  I came across Scoland’s Global Connections Survey published by the government (ours) in 2014. Amid  it’s morass of numbers it makes clear it is, as it says, just a survey so it is not definitive. It is voluntary exercise so a few thousand firms were asked to estimate their sales and just over 2,000 companies responded. Adding to the vagueness of the findings are the following sentences:

Issues with the organisational structure of the company refer to situations where companies are part of large international corporations, possibly functioning as a subsidiary or a franchise operation within Scotland. The Scottish part of the business may not know the sales figures or be able to split Scottish figures from the UK company account or be able to influence the company strategy for exporting. Furthermore, some companies use separate distributors to exports goods, who work independently.

Thirty one companies mentioned how difficult it was to split Scottish sales from UK sales or had difficulty determining visitor’s normal place of residence (particularly for the retail and hospitality sectors). For those companies having difficulty splitting Scottish sales from UK sales, this was mostly because accounting was done at a UK level.

CIRCUMSPECT

Trying to identify accurate figures for trade in goods and services within the UK is notoriously circumspect. It doesn’t mean Scotland isn’t indebted to English consumers.  We just don’t appear to know with the kind of precision that allows one side of the argument to state with conviction how much that is.

With a little further digging I came across an unimpeachable source, one I know you will all endorse – BBC Scotland. When the survey was published the Beeb ‘s report produced a figure for English sales into Scotland, one I have to confess I can’t locate in the document myself. (Must ask my eight-year-old)

They claimed to find that Scotland sells £50 billion to the rUK (mostly England) but they, the rest of the UK, sell £62 billion to us. £62billion! They sell more to us than we do to them. I just asked my eight-year-old and she says that’s about 25 per cent more than we sell to them. Suddenly it looks rather different, doesn’t it? It means we too have a money tap of our own and, if we’re playing silly games over trade, well, we can threaten to stop buying English  goods. It may not be as high a percentage of their exported goods as £50b is of ours, but it’s still a stonking amount of trade that England won’t want to lose.

Look at it another way, between us we have £110billion pounds of mutual business and somehow we’re supposed to believe it is either going to stop altogether or will be so degraded by borders and imports that it will slide away in to nothingness. A mythical border will eliminate all trade.

EXCHANGE

As I said at the start, I believe in markets and the incentive of economic exchange. Transposed on to this cross-border conundrum, it means I don’t see thousands of businesses allowing this to happen or indeed governments letting the tax revenue stop or accepting the closures and unemployment that would follow. To go further, in my experience businesses will sell to whoever has the money to pay and no questions asked. They won’t be prevented by a political border.

Now it’s true that a border in a different jurisdiction can mean checks, delays or tariffs. And that can be a drag on business, if a long way from elimination. But none of that is insurmountable and no one is going  to give up on sales that have been long established just out of political disagreement. Heaven and earth will be moved to keep trade flowing within the British Isles whatever decisions are made on EU membership. The Commission would meet with a very tough response if it tried to impose heavy duty on trade between Scotland and England.

And of course there is a way out, proposed by the UK itself. Britain doesn’t want a hard border with the Republic, something that would severely weaken the EU’s legitimacy were it to insist since peace is enshrined in the EU treaty detail. Can either the UK or the EU seriously argue in light of that they can still impose such a border on Scotland and England with £100billion of business at stake? The Common Travel Area provides another template for progress allowing a distinct and tailored solution for a particular problem withinin the archipelago.

This is one of those areas where common sense tells you there is a solution, one that not only can effectively guarantee cross border  trade but, with independence, can grow Scotland’s connection directly with our European neighbours.

One reason we haven’t been able to export more is explained in the paragraphs above about the interlinking of company ownership and accounts that concentrates exports in English ports and airports. Doing it for ourselves obliges us to engineer new contacts, new ferry routes and air routes and promotes Scotland and her produce without a UK middleman. If there is a chance of bigger markets through the EU, how many companies already got trading with Scotland will take the decision to move here and use Scotland as the platform for an EU export drive?

The fundamental point is that we trade with each other and that is destined to continue out of both economic and political necessity. Scotland holds key cards of its own. The Euro separatists are being  disingenuous if not downright dishonest and this is just the latest barb from Project Fear.

When next you’re told we’d lose £50 billion trade with England in an EU Indy Scotland, tell them : Aye. But you’d lose £60 billion. If you’re daft enough…

Useful Links:

HMRC: UK regional trade: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/595757/RT

Scottish Government Statistical Bulletin: S_Q4_2016.xlshttp://www.gov.scot/Resource/0044/00442854.pdf

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32 COMMENTS

  1. It always strikes me as an odd way to profess your love for keeping Scotland in a union with England is to threaten and to lie to the Scots and treat them like fools it just shows the contempt they really feel towards you treating you like an enslaved nation who in their right mind would want to stay part of that???

    • I guess that not enough Scots mind being treated like fools and second class citizens. It’s the fear of leaving the teat, cutting the umbilical cord, standing up and taking responsibility for themselves as a nation. My sympathy goes to those Scots who are being held back by them. They won’t stand and be counted for an independent Scotland.

  2. Derek,

    If rUK stopped all imports from iScotland, it would mean that it would need to find alternative sources of supply, presumably from elsewhere. At the very least that would be disruptive; at worst it may be at additional cost.

  3. Well put Derek, particularly like condensing it all down to “you would lose 60 billion”. We need good arguments but also short easily understood and repeated soundbites….as in ” what is your plan b”, “what currency will you use” etc as used by the no campaign. Unfortunately most folk will not follow a detailed reasoned argument.

  4. What a pity this article, which is a clear statement of the bleeding obvious, or it would be obvious to anyone who gave it a moments thought, did not come out in time for Eilidh Whitford MP to read it before she was interviewed on CH4 news on this very subject and floundered miserably

    https://www.channel4.com/news/scottish-referendum-snps-eilidh-whiteford

    Anyone asked questions on this should immediately turn it back on the questioner by asking them where
    r UK will source the goods they currently buy from Scotland. Then ask where rUK will find a market for goods they currently sell to Scotland.

  5. Domestic GB road freight transport statistics likewise confirm Derek is correct, this time in regard to trade volumes, i.e. that Scotland buys more goods from England that it sells to England, data below for 2015:

    Exports from Scotland – England – 16 m tonnes
    Imports from England – Scotland – 19 m tonnes

    (https://www.gov.uk/government/statistical-data-sets/rfs01-goods-lifted-and-distance-hauled – see Table Table RFS0138 – Goods lifted by region and country of origin and destination)

    • Will the 16 million tonnes of goods from Scotland to England include goods from Scotland that are destined for export via English ports? For example, whisky.

      • It may include some international exports going into RDC’s in England initially, however whisky is mostly sent by rail directly to ports in England or transported by ship directly from Grangemouth to continental ports.
        Practically everything Scots buy in our retail outlets/supermarkets etc comes up the M6 or by rail, and this tends to include an awful lot of higher value goods too (electronic goods, automobiles etc). So Derek is correct – Scotland actually has a significant trade deficit with England – though we should remember also that much of these goods imported to Scotland are not manufactured in England. I’m surprised the SNP has not yet picked up on the blatant unionist myth to the effect that Scotland has a trade surplus with England. Well done Derek.

    • Always the man with the detail on cargo shipments Alf. Your confirmation of the trade volumes indeed reinforces what Derek is saying. I think England, wants to overtake North Korea to become the world’s first autarky. Maybe we should let em build their wall, and cut off their oil and gas.

      • Cut off their Electricity as well Willie. I wonder what the Frenchies will charge for the lecky they sell to England as well. Oh and considering that Scotland makes most of their Gin, oh dear me what will they do? I guess they will be reduced to drinking watery weak beer!

        • You do realise that the border interconnector is increasingly seeing flows of electricity coming northwards don’t you? All those wind turbines mean that electricity needs to be found somewhere else when the wind isn’t blowing and these days it ain’t coming from Cockenzie or Longannet.

  6. Tonnes of goods as a measure of trade? ..consider this: which weighs more a kilo of potatoes or architectural drawings for a new class of freighter? Far fetched? Not as far fetched as most of the claims made by the readers on BBC as they quote sources of dubious merit.

    A key issue is the extent to which economic activity in both England and Scotland is dominated by subsidiarity/branch plants of foreign multinationals. In this case the ‘value’ of goods entering and leaving plants is set by the multinational with a view to avoiding tax. So–these are not market prices (a fact which drew the attention of a research group at the Bank of England which included De Ann Julius who directed one of the few empirical efforts to measure the effects)–these are ‘made up’ price. And the BOE study confirmed the extent to which they are misleading.
    Suppose 60% of economic activity in Scotland is priced in this way: we have a fairy tale of made up multinational transfer prices on exports and imports. I think 60% is about right…just walk down any high street in Scotland and out of every ten shops, how many are independent, family owned or locally owned?
    Finally: we need our own central bank with our own local geniuses to calculate our own position in this world; the rest is blather.

    • You are correct of course, value is more important that density, and internal corporate transactions tend to hide the real story. But what Derek has unearthed here answers the unionist scare story on trade – £62bn is greater than £50bn, i.e. ‘we bocht mair fi thaim than thay bocht fi uz’. That’ll dae fer noo.

  7. What I’ve noticed in the trio of recent big decisions (2 referendums and a US election) is that it seems the ‘nice guys finish last’. On all three occasions the ones who were angrier, more outspoken and often disingenuous were the Victors. I would argue that we must now go on the offensive ourselves and perhaps with that then yes, be a little angrier, such as when the 15 billion deficit is mentioned then our representatives should be angry and respond ‘How dare you suggest that….’ or when asked to wait til we see the deal before having a referendum then again ‘How dare you suggest that…..’. It seems to me our people are too nice. Look at the debate the other night where Adam Tompkins walked all over Fiona Hyslop purely by being angrier, more forthright and outspoken which makes our side look feeble and just roll over when we should be the angry ones, there’s so much to be angry about, yet playing Mr nice guy has never got us anywhere, especially when dealing with the likes off Andrew Neil, Gordon Brewer and the aforementioned Mr Tompkins.

    • No that’s all wrong. We’ll get independence by sitting round campfires shoogling tambourines and singing kumbaya. Remember – a positive campaign ALWAYS beats a negative one.

      The gloves should’ve been off 4 years ago.

      • You are so right, instead they ran the egg shell referendum, so circumspect, so polite, so PC, so Scottish. Let’s hope for the opposite next time, one thing Trump has proven that when you make a biased MSM the news by taking them on head to head the newsbringers quickly feel the heat and turn to ash.

    • Tricky one.
      Option 1. Double down. Maintain the higher moral ground as before
      or
      Option 2. Go for broke and fight fire with fire.

      Op. 1 Pros
      Consistency
      How close it got us last time – build on that
      Opponent since been exposed for ‘bluffing’ post IndyRef1
      Opponent expected to use same tactics again

      Op. 1 Cons
      As seen on Newsnight, the message will may still be suppressed by overbearing opponents.
      Masks the reluctance to fall into the unionist trap of being labelled ‘cybernats’, ‘ultra-nationalists’ or ‘democrats when it suits’ when strong, forcefully expressed opinions are made. We were advised – ‘Don’t take the bait!’
      Can make the cause look weak.

      Op. 2 Pros
      Opponents tactics have been exposed and any new ‘vows’ made will not hold as much weight with many who fell for it last time.
      Scots can afford to be braver with their viewpoint based of experience of IndyRef1. Stick it to them.
      There is more clarity on the stark choices this time. The debate surrounding the ‘what ifs’ (currency, EU membership, oil price etc.) that could not be definitively answered last time are not now informing a ‘In/Out opportunity choice’ for the Scots.
      Brexit, IndyRef2 and don’t forget the ‘Northern Ireland problem’, all compounded mean that if IndyRef2 is put to the people of Scotland then it’s not a ‘opportunity’ choice but a choice of ‘necessity’ that, in my opinion, bears a heavier weight for Scots and future generations – common sense informs our instinct for survival, fight or flight – you choose.

      Op. 2 Cons
      You fall into the unionist trap of being labelled ‘cybernats’, ‘ultra-nationalists’ or ‘democrats when it suits’ when strong, passionate, forcefully expressed opinions are delivered.
      Could be tarred with the same brush like ‘och, they’re just as bad as all them politicians just shouting at each other all the time.’

      The N. Ireland Problem – even on a hazy day you can see Scotland off the north east coast of N. Ireland. N. Ireland is closer to Scotland than England is to France.

      You can’t see N. Ireland from England. This is much like many MPs and the mainstream media that have been reluctant to acknowledge, appreciate, understand or communicate to rUK electorate how delicately balanced the politics currently are in NI and the potential impact any kind of a physical border limiting the free movement of people between north and south could have on the peace process (primarily funded by the EU).

      The article is brilliant specifically because it applies common sense to the whole issue that any reasonable person can comprehend.

  8. Good article Derek.
    I spend every other month in Yorkshire and I don`t see any signs of Scottish goods whether it be food , clothing or hardware etc, so I assume it must be elsewhere. The Tesco`s I shop in (a lot less) used to sell pre packed Scottish mince, beef joints and a reasonable selection of cheese, now there is nothing. The beef is now Irish and the smoked salmon Norwegian, so apart from Tunnocks, oatcakes and porridge oats there is nothing Scottish.
    By contrast walk into any super market in Scotland and the majority of foodstuffs are English. Just one example. And of course it would be nothing more than an act of malice should England cease trading with Scotland which of course they wouldn`t as it would cost s lot of English jobs.
    O/T.
    I`m once again enraged that STV will be showing the England game on STV tomorrow while the Scotland match is being shown on Sky thus depriving many Scots from watching their national team play, can you imagine if the position was reversed ? So what`s going on here. It seems to me that over the past 40 years there has been a dumbing down of anything Scottish and that includes industry , traditional music and dance and now football with 99% tv output English.
    There is silent ethnic cleansing in progress.

  9. England, especially gets the youngest and brightest Scots,, conversely many of the English moving to Scotland have finished their career and are retiring.

    Huge deficit in what services people provide and consume!

  10. Despotic Westminster enjoys Scotland’s natural resources, which keeps Englandshire afloat while denying the Scottish people the right to decide on their own Government – I’m obviously missing the point/not very smart – perm any two from three 🙁

  11. Nice summary in the final paragraph. Maybe our SNP reps could say something similar now and again when they’re getting harangued about it? Just a thought.

  12. Derek, I looked at this previously and found the BBC article you refer to which was by Douglas Fraser prior to the 2014 referendum. I have also noted the difficulty sourcing material. It’s easy to find source material re how much of a deficit Scot. Wales and N. Ireland have but nothing re England since this falls into UK figures. But if as we were told the UK subsidises the EU and the rest of the UK then to my mind England must be great surplus and yet Scotland is the only part of the UK that has a trade surplus so I can’t make sense of things. What’s clear in my mind is that most of the banks and mortgage lenders, retail outlet etc on our High Street are English do they want to lose Scottish trade and a tenth of their market overnight. What’s more, since Scotland is self sufficient is it too far to suggest that we actually subsidise food imports etc to the UK for the English market through the Companies spreading the costs uniformly throughout the UK. As food costs rise post Brexit this can only increase the costs to a non independent Scotland?

  13. “When next you’re told we’d lose £50 billion trade with England in an EU Indy Scotland, tell them : Aye. But you’d lose £60 billion. If you’re daft enough…”

    Derek I really do think they are daft enough unfortunately. They think they can get away with it because there is no democratic accountability in England.

    • I forgot to add – UKIP effectively won the last Brit GE and now have zero MPs in Westmidden. Democracy eh?

  14. Derek,
    you must remember the figures you quote are 2013 figures. They will be more now. So by past trends it would suggest that it will be a good bit higher now but on similar ratios. I have commented on this a number times in other blogs. It is never quoted when the yoons, yap on about how much trade the give us, never a mention of the bigger trade we give to them.
    Here is the original BBC quote -“The most recent Scottish government figures, not including oil and gas, show Scotland sold £50.5bn in goods and services to the rest of the UK in 2013. The rest of the UK sold £62.7bn in goods and services to Scotland.”

    We should remember when they talk about one way traffic. The could never afford the loss of Scottish trade,so little will change, never mind their disingenuous, fear mongering crap.

    • Unfortunately Scotland can afford the loss of UK trade even less…. rUK economy is more than ten times the size of Scotland’s but the value of their trade proportionately far less. Any significant fall in trade is likely to hit Scotland much harder. To paraphrase you: …never mind your disingenuos wishful thinking.

  15. I see the comments are a wee bit one sided and haven’t really critically addressed the article, more like nodded in agreement because it says what they want to hear. Allow me to redress the balance:

    The GDP of the UK as a whole (including Scotland) is approx 12 times the size of Scotland on it’s own. Thus the size of rUK economy is around 11 times that of Scotland.
    As the article suggests, the UK appears to sell slightly more stuff to Scotland than Scotland sells to rUK. Unfortunately at this point the author takes economic advice from an eight year old, who points out that is equivalent to around 25% more stuff and from that the author concludes that this is bad news for ‘England’. He does acknowledge that “it may not be as high a percentage of their exported goods”, but there ends any attempt to examin the significance of this statement thus brushing under the rug just how different it is, but he also concludes that this is “a stonking amount of trade that England won’t want to lose”.

    Well let’s just examine those figures and that conclusion. Firstly given that the rUK economy (I’m including Wales and N Ireland for now) is around 11 times larger than that of Scotland then if the rUK exports to us were at a similar level to those we export to them then they would be around £550billion (11 x 50billion), but they aren’t, they are massively less, almost eight and a half times less, thus any proportionate fall in those exports will have far less impact on the rUK economy than an equivalent fall in our exports. As an analogy, find someone earning 10k a year and take 500 pounds from them, then find someone earning 110k a year and take 620 pounds from them, who is likely to feel the impact more? The vast relative difference in the ratio of exports to economic size to exports is carefully glossed over in the article, the eight year old has an excuse, I’m not sure the author does, innumerate or not.

    However the really silly bit is the conclusion that somehow “England” won’t want to lose that trade, while implicitly ignoring how Scotland might react to losing a proportionally much greater amount of trade (i.e. eight times as much). One can either assume that if Scots aren’t bothered then why would the English be bothered about losing proportionately far less? Alternatively one might conclude that if the ‘English’ won’t want to lose their trade then Scots should be at least eight times more concerned about any proportionally equivalent loss, but seemingly this hasn’t been considered, or more likely is just being ignored as this article is really all about trying to justify independence and not really an attempt to seriously examine the economic impacts.

    Of course the article sarcastically creates the strawman that someone is implying that all that trade will stop, I haven’t seen any serious economic commentators, or indeed anyone that can add up, who thinks that. Trade won’t stop but it will be impacted, nobody really knows by how much, could be just a few percent, or maybe at the very worst a few tens of percent. If we just assumed a figure of say 10% implying a significnt but minor impact and going back to the analogy above: That is equivalent taking £50 a year from a 10k earner and £62 a year from a £110k earner, still going to hurt the smaller guy a lot more.

    Much of the argument coming from pro-independence actvists, tries to imply (like this artcle) that somehow trade between Scotland and rUK won’t really be impacted by Scotland being independent, that it’s all some unionist scare story. However the SNP’s stated aim is for Scotland to be in the EU or at least a member of their free trade area (with its associated rules and tarrifs), at the same time their entire justification for having another independence referendum is based on us being taken out of Europe being a bad thing, including for Scotland’s economy. One has to wonder how they square the circle that trade with Scotland and the EU is going to be badly impacted by an EU trade barrier going up between us (as part of UK) and its members, but that weirdly the same won’t apply when Scotland is on the otherside of that EU barrier than rUK. How does that logic work?

    But here’s something else to ponder; any tarriffs or restrictions on economic activity in the EU (e.g. the financial ‘passporting scheme’) are EU imposed, thus to change them Scotland needs the agreement of all the other counties of the EU, in contrast in the UK outside of the EU they can impose whatever barriers they like or none at all as they will have complete control of their import trade rules, thus if there’s anything important to them that we sell them they can choose to impose no restrictions, meanwhile we can’t do likewise without asking France, Austria, Malta, Romania and twenty odd other countries for permission. Furthermore if we were to lose a proportion of trade with rUK due to being on opposite sides of the EU barrier then we would be looking to make up that difference by boosting trade with other countries. However if it’s that easy to boost trade with the rest of the EU then why aren’t we doing it already given that we have been in the EU for forty years and are still in it? I suppose that’s the fault of Westminster that Gemans aren’t buying enough of our stuff?….. Unfortunately Scotland’s options for flexibility on trade will be exactly the same as they are now but in contrast the UK may well be impacted by losing both some trade with Scotland and the rest of the EU but at least will have the option to negotiate with the entire rest of the world on it’s own terms to try and boost trade, an option not available to an EU rule bound Scotland.

    There are no doubt some good arguments for Scottish independence but export economics is certainly not one of them especially with ‘brexit’ on the horizon. To pretend otherwise is disingenuous, or as the author indicates, exhibits the economic understanding of an eight year old.

    • “Firstly given that the rUK economy (I’m including Wales and N Ireland for now) is around 11 times larger than that of Scotland then if the rUK exports to us were at a similar level to those we export to them then they would be around £550billion (11 x 50billion), but they aren’t, they are massively less, almost eight and a half times less, thus any proportionate fall in those exports will have far less impact on the rUK economy than an equivalent fall in our exports.”

      Such a claim is disingenuous.
      Scotland IS a small economy. Are you seriously trying to make the (daft) assertions that because England is such a proportionately larger “manufacturer” then we in Scotland MUST consume that proportional difference?
      What? That is senseless…
      Reality dictates that manufacturers and retailers (who ARE now mostly now English or combined English/multinational conglomerates and now longer Scotland’s Wm Low or Galbraiths or Templetons of old ) WILL BE VERY VERY unhappy at the potential of very substantial (£65billion?) trade with Scotland.
      What do you imagine any conversation with The Minister for Trade would sound like?
      I’ll let you guess….

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