Building a New Scotland: An independent Scotland's Place in the World

A more successful Scotland with independence

Key points

Through membership of the EU as an independent country, Scotland would regain the many economic, societal and cultural benefits and opportunities lost through Brexit.

Scotland would be part of the world’s largest single market – almost 450 million consumers^[111] compared to the UK’s 67 million^[112] – and would benefit from favourable trading terms and contribute to setting global standards.

An independent Scotland would be able to focus on the promotion of Scottish businesses, the sectors driving our economy, and to protect Scottish consumers internationally.

An independent Scotland could play a leading role in global economic development aiming to support sustainability and wellbeing, including through the Wellbeing Economies partnership and by supporting the reform of International Financial Institutions.

Scotland has a strong global brand, and the potential to lead in the industries of the future. With the powers of independence, Scotland could harness these strengths to build a flourishing economy.

Scotland in the global economy

Scotland is already an open, trading nation and, as set out in previous ‘Building a New Scotland’ papers, the full powers of independence would enable Scotland – as a member of the EU – to flourish in the global economy.^[113]

As discussed in ‘Building a New Scotland: Independence in the modern world,’^[114] many independent European nations comparable to Scotland have very open economies that compete successfully across a range of global markets. Openness to global trade is one important factor helping to explain the high productivity achieved by these nations.

‘Building a New Scotland: A stronger economy with independence’^[115] explained that, as an EU member state, Scotland would be part of a market that is much larger than the UK – seven times by population.^[116] It would also directly benefit from the global weight of the EU’s Common Commercial Policy. The EU continues to negotiate new trade agreements to open markets: it is the top trading partner for 75 countries.^[117] And its size and scale mean that it is in a strong position to achieve both trade and non-trade objectives, in areas such as social, labour and environmental standards.

Scotland is already demonstrating leadership in global economic development. The Scottish Government plays a leading role on wellbeing economy agenda on the international stage, with Scotland a founding member of the Wellbeing Economy Governments network (WeGo).^[118] WEGo now includes Iceland, New Zealand, Finland and Wales, and other countries, including Canada, are engaging ever more closely with the network. Scotland is determined to build on this and strengthen the network further. The Scottish Government continues to work closely with the OECD, recognising that many countries are active in this agenda.

The vision currently set out in our National Strategy for Economic Transformation (NSET)^[119] is that, by 2032, Scotland:

will be recognised as a nation of entrepreneurs and innovators, who will have embraced the opportunities of new technologies. We will have boosted productivity considerably and focused resources on opportunities that will transform our economy and our society. We will be a nation confident of our place in the world, attracting international investment in research and innovation, in the industries of the future, and an exemplar of a just transition to net zero.

Through a range of measures included in NSET, the Scottish Government is committed to ensuring that Scotland will be recognised at home and throughout the world as:

• an international benchmark for how an economy can transform itself, de-carbonise and rebuild natural capital whilst creating more, well-paid and secure jobs and developing new markets based on renewable sources of energy and low carbon technology
• a leader in its chosen areas of research and development, collaborating with other centres of excellence across the world and using these strengths to stimulate business opportunities
• a magnet for inward investment and global private capital
• an outward-looking nation, engaging internationally, exerting a meaningful influence on the policies, trends and events that shape our world

Promoting Scotland globally

The needs of Scotland’s economy are often not prioritised when the UK Government undertakes promotional activities overseas.^[120] With independence, future Scottish Governments could have a tight focus on growing and supporting those sectors which matter most to Scotland, and which are well placed to compete globally.

With independence, our expanded international network would promote Scotland as a hub for innovation, trade and investment to a much wider audience. By exclusively promoting the innovative, high-quality and globally competitive products and services Scotland offers, we could help our businesses to deliver the trade and export growth that will transform the Scottish economy.

Trade and investment are vital to our economy. Trade supports our economic prosperity, improves our productivity and helps us to be globally competitive and entrepreneurial.^[121] Scotland has a record of engaging constructively to protect and promote Scotland’s interests. We are a trading nation with a long and proud exporting history, with world-class businesses trading successfully across the globe.

The economic benefits which this trade creates are fundamental to improving living standards, providing good jobs and prosperity for the people of Scotland and the nations we trade with.^[122] There is global demand for Scottish goods and services. Our export, inward and capital investment plans^[123] explain how a ‘Team Scotland’ approach^[124] can support and showcase Scottish expertise, while our Brand Scotland activity harnesses our cultural and economic strengths to promote Scotland as a desirable country in which to live, work, study, visit, and do business.^[125]

Scotland’s Trade and Investment Envoys bring representational heft when promoting Scotland’s business sector to governments and industry around the world.^[126] They promote Scotland’s international trade and investment interests and strengthen local market knowledge in the countries and sectors they represent. First established in 2017, the envoys are appointed by the Scottish Government and are volunteers who work in a non-political capacity.

But Scotland currently lacks meaningful involvement in the development of the agreements that determine how our businesses trade. The Scottish Government uses all the levers at our disposal to support our economy and its internationalisation, but these are limited. With the other levers reserved to the UK Government, and the unwillingness of successive UK Governments to engage meaningfully with the Scottish Government on trade policy,^[127] we are unable to deploy the full range of policy levers to support Scotland’s economic development.

Trading arrangements affect the interests and daily lives of Scotland’s businesses and citizens – including impacts on food, jobs, health, our public services and the environment. This Scottish Government has sought to engage with the UK Government in ways that support Scotland’s economy, its people and the planet.^[128] But Westminster has failed to respond to Scotland’s clear and distinct positions in its approach to the negotiation of Free Trade Agreements (FTAs).^[129]

For example, throughout FTA negotiations with Australia and New Zealand, this Scottish Government urged the UK Government to protect Scottish producers from imports produced to lower environmental and animal welfare standards than those Scottish producers meet. However, in neither case was this protection included in the final agreement. Former UK Government Environment Secretary George Eustice now concedes that ‘the Australia trade deal is not actually a very good trade deal for the UK’.^[130] An independent Scotland will put Scotland’s industries and people at the heart of our trading arrangements.

An independent Scotland’s principled approach, in line with our strategic approach to trade,^[131] could position trade within a wider economic, social and environmental context, assessing the impact and desirability of short-term market access gains against longer term economic, social and environmental goals. For example, addressing tensions between trade liberalisation and supporting public services by protecting the NHS from enforced competition or increases in drug costs as a result of trade liberalisation. This would be within, and would benefit from the weight of, the EU’s trade policy.

Scotland opposed leaving the EU and we are now seeing the damaging impacts of Brexit on trade which the Scottish Government consistently warned about.^[132] Scottish Government modelling shows that the value of Scotland’s total trade in goods with the EU (imports plus exports) was 12% lower in 2021 than it otherwise would have been under continued EU membership.^[133] The UK Government’s own analysis recognised Brexit as having long-term harmful economic impacts.^[134]

By re-joining the EU, the world’s largest single market, an independent Scotland’s businesses would gain access to almost 450 million consumers^[135] with reduced barriers to trade. They would benefit from the huge opportunities that come from the EU’s ability to secure advantageous trade arrangements with other countries. Combined with an expanded international network focused on Scotland’s interests, access to all available foreign and trade policy levers, and a broad network of trade advisors at home and overseas, we could support our key sectors and businesses to tap into opportunities in overseas markets. This would increase our competitive advantages and help us realise our ambitions to transform Scotland’s economy.

Scotland’s economic strengths

Scotland has distinct strengths and enviable resources in key areas of the economy, but very few of the powers necessary to fully harness these strengths. With the powers of independence, we could focus our domestic and international policy efforts on the sectors that will see Scotland thrive and compete in the global economy.

Major opportunities exist for Scotland in the production and export of the low carbon and renewable energy required to power the green economies of the future. Our abundant natural resources, including water and offshore wind, coupled with the necessary infrastructure and a skilled workforce in the energy sector means Scotland could be a major player in the developing global hydrogen market. Scotland has an ambition (as set out in the Hydrogen Action Plan^[136] and draft Energy Strategy and Just Transition Plan^[137]) of 5 GW of renewable and low carbon hydrogen production by 2030 and 25 GW by 2045, providing a significant employment and export opportunity. Countries across Europe are increasingly seeking cleaner, more secure energy sources. A government with the full powers of independence, focused solely on Scotland’s economy and priorities, could ensure that Scotland grasps this opportunity.

Carbon capture, utilisation and storage (CCUS) is another industry where Scotland has real competitive advantages and enormous potential^[138] to be at the heart of this crucial industry in Europe. CCUS is central to our economic and net-zero ambitions, but the regulatory, fiscal and legislative levers to realise this potential are reserved to a UK Government which has failed to provide reliable timescales or funding for Scottish projects.^[139] The government of an independent Scotland could focus investment on the Scottish cluster, helping secure a just transition to a net- zero economy.

Scotland’s economic strengths lie not only in the energy sector. In ‘Building a New Scotland: a stronger economy with independence,’^[140] we set out the areas of advantage in our “rich and diverse” economy, including a food and drink sector responsible for GVA of £5.8 billion in 2019,^[141] a world-leading tourism industry, one of Europe’s largest life sciences clusters, and a growing space sector producing more small satellites than anywhere else in Europe.^[142]

Global developments

There have been significant recent developments in areas of the international economy, including on industrial strategy. Recent US legislation such as the Inflation Reduction Act 2023 provides strong tax credits, subsidies and loans totalling around $400 billion^[143] to support the development of domestic cleantech and a semiconductor supply chain. These incentives are making US industries more attractive for foreign investment. Canada has responded with around C$80 billion in tax credits for clean technologies.^[144]

The EU has also introduced a series of high-profile measures, designed to support competitiveness and reduce the bloc’s dependency on the energy and technology of other nations. The EU Green Deal Plan will mobilise at least €1 trillion in sustainable investments over the next decade, aiming to enhance the competitiveness of a range of green sectors and thereby accelerating the transition to net zero.^[145]

While the US and EU intervene to stimulate investment in the industries of the future, enhance economic resilience and shape a fairer economy, the UK Government’s response has been seen to be lacking.^[146] Scotland is tied to the UK with only limited progress able to be made in areas such as industrial policy while many economic policy levers remain reserved to the UK Government. With independence, Scotland could navigate a different path, for example with regards to trade negotiations and regulatory frameworks and standards which are critical in ensuring that Scottish companies can benefit from global market opportunities. Independence within the EU would widen the range of potential policy options and enable a more co-ordinated and cohesive approach to industrial policy.^[147] Independence and EU membership would also offer Scotland the chance to be fully involved in policy development and decision making, including economic policy, as protected by the EU Treaties.

Scotland’s brand

Scotland has an enviable reputation, with a strong international profile and a large global diaspora. Tens of millions people worldwide claim Scottish ancestry, with some commentators suggesting at least 40 million.^[148]

Amongst our global diaspora, the GlobalScots are an influential group of senior business leaders, who are motivated to give something back to Scotland, offering their time and expertise on a voluntary basis. They have provided insight and thought leadership with Scotland’s enterprise agencies to successive Scottish Governments. They support companies by advising and mentoring, giving the benefit of years of experience. The GlobalScot Network currently has over 1,200 members across 64 countries globally.^[149]

Both our Trade and Investment Envoys and GlobalScots programme, initiatives of the Scottish Government and its economic development agencies, support the internationalisation of the Scottish economy. With independence, we would work further with Scotland’s diaspora to support Scotland’s economic ambitions.

Scotland also has a distinctive international brand and identity. Scottish culture, food and drink, landscapes, music, tourist destinations, languages, universities, and sporting heritage, such as our golf courses, are major attractions to the rest of the world.

Our international brand is one of our most important assets. Scotland consistently ranks highly in terms of international brand recognition. According to the 2023 Nation Brand Index^[150] of international comparisons of country reputations, Scotland ranks 16th from 60 nations – comparable with other similarly sized, high-income democracies and greater than many sovereign countries, despite not being an independent nation. Independence could help

Scotland enhance its brand still further, increasing our attraction as a great place to live, work, study, visit, and do business.

With independence, these global linkages could be maximised for the benefit of Scotland’s people, businesses and institutions, amplifying Scotland’s distinctive perspective on global affairs. Speaking English, the international language of science, business and diplomacy, will facilitate the further development of the strong connections we enjoy with friends and partners around the world.

For centuries, Scots have helped to shape the world we know today. We have built on these historic connections to develop relationships of substance. As an independent country we would be able to fully capitalise on these relationships and expand our networks, opening new opportunities to work with likeminded countries and organisations on issues such as the climate emergency, to learn from others through policy exchange, and to share Scotland’s experience and expertise.