Bitter Scotland Weighs Its Own Divorce

Scotland Must Move to Call Another Referendum: Salmond
  • Nationalist leader vows to keep nation in the EU regardless
  • More Scots favor seeking independence to avoid English fate

Scots, famously, tend to root for any sports team that plays against England. The roar of jubilation at Edinburgh’s Three Sisters bar Monday night as tiny Iceland knocked Scotland’s ancient rival out of the European soccer championships had an extra edge.

QuickTake Scotland’s Independence

Despite voting to stay in the European Union in last week’s Brexit referendum, Scots now face being forced to leave after being outvoted by a predominantly English majority. That realization has brutally exposed the lopsided nature of the U.K., a union of four nations in which there are almost 10 English voters for every Scottish one.

The resulting emotional backlash has thrust Scotland’s independence back into play just two years after the nationalists suffered defeat in a referendum to leave the U.K. The leader of the semi-autonomous government, Nicola Sturgeon, vowed to keep her country in the EU -- with or without the rest of Britain. EU Commission President Jean-Claude Juncker said on Wednesday Scotland had won the right to be heard in Brussels.

"It’s an injustice," said Iain McLaren, a 40-year-old Edinburgh IT worker, as he nursed a post-game beer at another sports bar in the Scottish capital. "I voted a reluctant ‘No’ in 2014, because the independence campaign hadn’t made the case economically. But the Brexit vote has changed everything politically. Now I’m willing to take the gamble."

Hearts and Heads

Two recent opinion polls suggest that if another independence vote were held today, it would succeed, breaking up a three-centuries-old union and adding to Europe’s disarray.

What rankles potential swing voters like McLaren is that they expected English voters to stick with the EU for the same reason Scots stuck with the U.K.: although their hearts cried freedom, they decided it would be economically reckless to follow through.

Referendum map
Referendum map

In England, however, a majority decided last week to throw caution to the wind. Ignoring warnings from economists, "Leave" voters opted to escape what they perceive as a European superstate. As a result, about $4 trillion was wiped off the value of global financial markets, the U.K.’s credit ratings were downgraded, and the Bank of England said it was preparing to counter a potential economic downturn.

"I really think the Scottish National Party will have to call another referendum," said Richard Parry, honorary fellow at the University of Edinburgh’s Centre on Constitutional Change. "I can’t see how they don’t at least try."

Different Vibe

The mood in Edinburgh, the traditionally staid home of Britain’s second-largest financial industry, is telling. In 2014, it voted to remain part of the U.K. by a wider margin than the national 55-45 percent victory margin. Last week, almost three-quarters of voters in the city opted for the status quo with the EU.

Yet the SNP has become a powerful machine and Sturgeon has a troop of members behind her numbering more than one in every 50 Scots. The party won all but three of Scotland’s 59 seats in the U.K. Parliament last year and every one of its regions rejected Brexit.

For analysis of Scotland’s independence drive, click here

Another tilt at independence may not happen for a while, though. At Scotland’s regional parliament on Tuesday, party leaders continued to differ over the independence issue in a debate, at the same time expressing shock and anger at the Brexit result and at the often xenophobic campaign that produced it.

In a speech setting out her plans, Sturgeon, 45, focused on the shared goal of keeping Scotland in the EU and open to immigration. There was no hiding the political pressure, as one SNP legislator after another rose to cast doubt on the feasibility of remaining part of two divorcing unions.

Existential Question

Brexit is one of the political shifts the SNP has said all along could trigger another independence vote, but, as for investors, bookmakers and pollsters, the result came as a shock. Sturgeon headed to Brussels on Wednesday to garner support for Scotland’s continuing membership in an alliance it joined with the U.K. in 1973 and was scheduled to meet Juncker. Its cohabitation with England goes back to 1707.

"The existential question being asked of us is whether we leave one union or the other," Michael Russell, the SNP head of the Scottish parliament’s finance committee, said in an interview. "This isn’t about purely economic determinism."

Russell was even bullish about Edinburgh benefiting should London be forced out of the EU while Scotland remains. "If I were a company looking at what to do, I’d already be factoring Edinburgh into my plans," he said.

Sturgeon will have to move carefully to choreograph what she does with movements by the U.K. and other EU countries, according to Parry at Edinburgh University. Key questions such as when -- or even if -- the government in London will trigger the two-year negotiation to exit the EU remain uncertain. Equally unclear is whether the other 27 EU members would be willing to accept that Scotland inherits the U.K.’s position in the EU when it leaves, rather than having to apply as a new state.

Harsh Economics

Anger over Brexit will also have to overcome harsh financial realities, because the economic case for independence has only weakened since 2014.

Tumbling oil prices mean that the North Sea oil tax revenue the SNP was counting on to fuel an independent Scotland are projected to reach just 35 million pounds ($47 million) this year, compared with the Scottish government’s projection at the time of at least 7 billion pounds. Scotland’s budget deficit -- currently subsidized by the rest of the U.K. -- has hit a potentially crippling 9.7 percent of gross domestic product.

Moreover, Scotland exports more than four times as much to the rest of the U.K. as it does to the rest of the EU -- and the EU’s share is falling.

McLaren, back at the sports bar, said all this bad economic news had helped him to live with the reluctant choice he made back in 2014. But "now you forget about that," he said. The U.K. also no longer looks like a safe economic bet.

Neither he, his friend Kenny Turnbull, nor other Scots interviewed at Milne’s and the Three Sisters sports bars could summon up sympathy for England’s humiliating 2-1 defeat by Iceland, a nation the size of a London suburb, on Monday. It led to the immediate departure of the team’s manager in an echo of Prime Minister David Cameron’s resignation right after last week’s referendum loss.

"I’d actually like for England to have made it through to the semi-finals," said Turnbull, 39. "That way they’d get all puffed up about how they’re the best team in the world -- and be destroyed when they lost."

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