Kirsty Hughes

In-Depth Analysis

Both hard Brexit and soft Brexit scenarios each present their own challenges for the UK, writes Kirsty Hughes. She suggests that, for Scotland, it is almost certain that it will exit the EU with the rest of the UK, and that, in the event of independence, the question then becomes whether Scotland would rejoin the EU.

Prime Minister Visit to Scotland – Jul 2016, Tom Evans (Crown Copyright), CC-BY-NC-ND-2.0

As Theresa May makes clear the UK is headed for a hard Brexit, the pound continues to fall, and the EU27 harden their public statements on how they will approach Brexit negotiations, the options for Scotland on Brexit are narrowing rapidly.

But this greater clarity on what lies ahead does not make happy reading for those who hope Scotland has options to stay at least partly in the EU, perhaps by staying in the single market.

Nicola Sturgeon will doubtless address Brexit in her conference speech later this week – in the face of May’s obdurate approach, one key question is how tough and how clear will Sturgeon be on her own pro-EU, anti-Brexit strategy.

What We Know

The UK will trigger exit talks with the EU – under its Article 50 of the Lisbon Treaty – by March 2017. That means the UK will leave the EU by the start of 2019 (unless the EU27 agree unanimously to extend the talks – which is very unlikely).

The exit deal that will be done by the start of 2019 will not be a comprehensive UK-specific agreement. It will be a deal focused on a few key issues including: the rights of EU nationals already in the UK and UK nationals elsewhere in the EU, rights of UK nationals working in EU institutions, and the ending of budget payments and receipts by the UK to and from the EU.

Any comprehensive UK-EU deal will take several years and have to be ratified by all EU member states and the European Parliament. If the UK doesn’t work out a transitional trading deal with the EU in the meantime – to cover the period between Brexit in 2019 and the agreement of a comprehensive EU-UK deal – it will have to trade under WTO rules. Many business leaders are already expressing great concern over the damage a sudden reversion to WTO rules, and leaving the single market, could do.

Theresa May has made it clear her government will impose immigration controls – probably through a work permit system – on EU citizens coming into the UK, which will therefore be reciprocated in some form by the EU too. She has also said the UK will take back control over EU legislation, through the Great Repeal Act. The EU27 have said there is no compromise available on staying in the single market while rejecting free movement of people, so Theresa May’s approach looks clearly to be one of a ‘hard’ Brexit.

Whether the UK will come out of the EU’s customs union is not yet decided, but staying in looks highly unlikely given the UK government’s emphasis on becoming a leading exponent of free trade around the world.

Theresa May was also very clear at Tory party conference that she will do no side-deals on Scotland – ‘there are no opt-outs from Brexit’, she said, going on to say the UK will negotiate as the UK and leave the EU as the UK.

The Lib Dems continue to argue there should be a referendum on the final UK-EU deal, something Nicola Sturgeon said recently could be reasonable. But since the UK will leave the EU by early 2019, and no comprehensive deal will have been agreed by then, then a referendum on the agreed deal couldn’t happen until the UK had left the EU – a re-run of the EU referendum several years after Brexit would mean the UK would have to apply to rejoin the EU, a process that would be politically rather interesting in terms of how the EU27 would react after having spent years negotiating a new EU-UK deal for the UK outside the EU.

Any second UK EU referendum that could stop Brexit would need to happen before the end of the two years of Article 50 negotiations – and that would also assume that if the UK voted to stay in the EU, and withdrew its Article 50 notification, that the EU27 would go along with that. But almost no UK politician is currently calling for such a rerun of the EU referendum.

Meanwhile, the Labour Party has been conspicuous by its absence from the Brexit debate until the last few days. With leader Jeremy Corbyn calling for maintaining immigration flows while not supporting staying in the single market, Labour seems to have a policy that will appeal to neither Remain nor Leave voters. In contrast, the newly appointed Brexit shadow minister, Keir Starmer, and former leader, Ed Miliband are now arguing, with pro-Remain Tories and other MPs, for a House of Commons vote on what sort of stance the UK should take in opening its Brexit talks with the EU, including the option of staying in the single market.

Starmer, Miliband and others – including many big UK businesses – want the UK to stay in the single market, but Starmer also, in contrast to Corbyn, wants controls on immigration. How they see this being squared with the EU27’s insistence on maintaining all four fundamental freedoms of the single market (people, goods, capital and services) is unclear. And how the disagreement between Labour’s leader and his shadow Brexit minister will be resolved is also unclear.

This ‘soft Brexit’ approach, while politically interesting, is also puzzling. If the UK were to end up with a Norway-type deal – in the single market including free movement of people but not in the customs union (but in EFTA) – then the UK would, through Brexit, have given up its vote and influence on the rules of the single market. So the UK would have given up control, not taken back control – the aim of the Leave campaign – and it would not have restricted immigration, another Leave goal. Having no say on the rules of the single market is not something that would appeal to Remain voters either. Yet ‘soft’ Brexit is the main alternative currently being put forward by UK politicians to Theresa May’s hard Brexit stance.

Given Theresa May’s narrow majority in the House of Commons, some tough debates look to lie ahead, but whether the pro-Remain MPs, who now are focusing on the single market rather than arguing for a second EU referendum, can force a debate let alone win a vote on the Brexit talks, and on the single market, remains to be seen.

And if they could force and win such a vote, would May then open talks with the EU for ‘soft Brexit’, when the EU will not countenance free movement controls, and when this means giving up, not taking back, control? A ‘hard’ Brexit looks seriously damaging for the UK economy and will take years to negotiate, creating long-term uncertainty. But a ‘soft’ Brexit looks undesirable from both a Leave and a Remain point of view – and does not look achievable from the EU27 point of view.

What Options for Scotland?

In this climate of political uncertainty and democratic challenge at UK-level, what are Scotland’s options?

Scotland’s government is looking at options for Scotland to stay in the EU or at least in the EU’s single market, including having the advice of First Minister Nicola Sturgeon’s Standing Council on Europe. But the main potential options for Scotland – staying in the EU and the UK, or staying in the single market while the rest of the UK does not – are starting to look impossible or politically infeasible.

The so-called ‘Reverse Greenland’ idea of Scotland (perhaps with Northern Ireland) staying in the EU as the member state, while England and Wales opt-out, is highly problematic. Under a ‘Reverse Greenland’ scenario, Scotland would be agreeing common foreign and trade policies with other EU member states while, in total contradiction to this, Westminster would also be responsible still for overall UK foreign and trade policy. Other challenges abound in this scenario – and it is hard to see the UK government ever agreeing to such an outcome.

Even Scotland staying in the EU single market while the rest of the UK did not would create major issues around further devolution. It would require a raft of new policies to be devolved from migration policy – to ensure free movement between Scotland and the rest of the EU – to product standards, health and safety and more. It would raise questions over how free movement of people between Scotland and the EU would operate while England and Wales were not part of this. And it would require the rest of the UK’s future trade deal with the EU to be consistent with Scotland being in the single market without requiring new customs or other checks at the England/Scotland border.

Politically, it seems highly unlikely the UK government would go along with this – it would split the UK’s own internal market and would mean Scotland would have a much greater pull for foreign direct investment than England and Wales. And if Scotland was, despite this, somehow able to go for such a differentiated approach, then independence in the EU would give it much more say in the rules of the single market, so debate would focus on whether such a half-way house – of being in the UK and in the single market – was desirable.

Theresa May seems anyway to have already ruled out any differentiated deal in her speech at Tory party conference. And the EU27, however sympathetic to Scotland’s position, are not going to countenance any differentiation for Scotland if the EU’s negotiating partner for Brexit – the UK government – does not ask for it.

Scotland is already affected, just like the rest of the UK, by the fall in the pound, by the economic uncertainty that is leading to postponed investment decisions, and by some large companies already looking to move staff elsewhere in the EU.

Although the UK is still in the EU, it has thrown away most of its influence on EU decisions in the remaining years that it is still a member. In meetings of the Council of Ministers, insiders say that no one now listens when UK representatives talk. The UK still has a vote – but without good allies in other member states to work with on blocking or promoting decisions, the UK’s and Scotland’s interests are already not being protected in the EU.

Ireland faces some of the biggest challenges of the EU27 over Brexit. It is working to find ways – which it will have to get the EU27 and UK to agree to – that can keep an open border to Northern Ireland and cause least damage to trade and economic relations between Ireland and the UK. Whether Ireland can prevent a hard border to the north is unclear. If it can, this might create a useful precedent for Scotland if it goes independent as an EU member state in its own right in the future. But Ireland cannot afford to take Scottish interests into account in such difficult negotiations. Its priorities will be its own economy and links to Northern Ireland and the UK.

Can Scotland Stay in the EU through an indyref2?

The timescale now looks very tight for those who would like a second independence referendum before the UK leaves the EU, so that Scotland can simply stay in when rUK leaves. If Scotland would need 18 months to two years to disentangle from rUK if there was a Yes vote in an indyref2 then, unless an indyref2 is held in the first half of 2017, it is unavoidable that Scotland will leave the EU when the UK does.

Some have argued for an indyref2 before the end of 2018 so that Scotland has at least made its views clear before the UK leaves. But legally, if the UK leaves at the start of 2019, even if there were a Yes vote in an indyref2 in autumn 2018, Scotland would still be outside the EU too – it is hard to imagine any transitional status that could apply to keep Scotland in the EU while it was legally part of the UK.

If that were the timing – late 2018 – then in the short-run Scottish laws and regulations would still meet EU rules, but these could rapidly diverge, depending on what Westminster chooses to do in those areas that are not devolved to Holyrood. Scotland would find itself part of whatever immigration and work permit system the UK had decided to introduce. And it would be part of whatever budget deal, withdrawal from EU funding programmes, lack of access for services’ trade and so forth that the Article 50 Brexit deal set out.

Even so, an indyref by the end of 2018 would mean Scotland could, as part of its divorce talks with the UK, hold parallel membership talks with the EU, and attempt to limit the damage so that its laws did remain consistent with the EU, allowing fast-track negotiations and re-entry. But it would not be anything like as smooth or speedy as could be achieved if there was a very rapid indyref2 in early 2017, which currently looks unlikely.

A later indyref2 – in the early 2020s – opens up the possibility of a more serious divergence in Scottish and EU laws, and a longer, more politically unpredictable route back into the EU, perhaps taking until 2030.

The Brexit outlook for Scotland, in summary, looks as follows:

• Scotland is likely to leave the EU with rUK in early 2019 – after the initial two-year exit talks are completed, but before the final comprehensive UK-EU new trade, foreign policy and security deal is struck.
• Scotland is unlikely to achieve any major differentiation in its relationship with the EU compared to rUK. Any minor differentiation that might be agreed would be part of the final comprehensive deal that the UK would strike with the EU after several years of talks, not part of the initial 2019 exit deal.
• Unless there was a successful indyref2 in the first half of 2017, Scotland will leave the EU with rUK.
• A successful indyref2 in 2018 could facilitate a relatively fast-track route for Scotland to rejoin the EU, but Scotland will not be able to stay in the EU if it is still legally part of the UK when the UK leaves.
• A successful indyref2 in the early 2020s could see a greater divergence between Scottish and EU laws and regulations in the meantime and a longer, slower route back into the EU – if that remained Scotland’s goal – perhaps by 2030.
• The UK government will consult the Scottish government on its negotiations with the EU, but so far Scotland looks like having relatively little voice or influence on those talks.
• Scotland will have no protection from the negative economic effects of Brexit in the absence of any major differentiation in its relationship with the EU compared to rUK, at least as long as the UK government continues to pursue a hard Brexit.

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Kirsty Hughes
Friends of Europe

Dr Kirsty Hughes is Senior Fellow at Friends of Europe, Brussels and a writer and commentator on European and international politics and policy. She has worked for organisations including Chatham House, the Centre for European Policy Studies, Oxfam GB and the European Commission.

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