The decision in Scotland is about politics, not economics – though it seems certain that economic concerns did buttress the No case. The coming months will also be about politics, as the new powers for Scotland are clarified, along with the changes for the rest of the Union too. But there will be a three-fold economic benefit to the Union that will feed through quite quickly, and this will be felt on both sides of the border.
First, there is the end of uncertainty in Scotland. There is quite a lot of evidence that the Scottish economy has been held back for the past 18 months or so. Property prices and particularly sales have been muted by comparison to the rest of the UK; reported business confidence has been lower; investment projects have been delayed. So there should be an immediate bounce, driven by deals going ahead that were being delayed. This will obviously be strongest in Scotland itself but there will be some marginal impact on the rest of the UK. Scotland is a big export market for the rest of Britain.
Second, Brand Scotland has had huge media exposure to the world. With the possible exception of Ireland, no other country of similar size generates such resonance, or has such goodwill from a large and engaged expatriate population. The tasks now will be to translate the publicity into business and to engage the expats more closely with the country. The benefits are impossible to quantify, but the UK Olympics give us some feeling for the potential boost a big event can give.
Third, the UK as a whole is likely to get better governance as a result. A looser UK in political terms may be a more competitive UK in economic terms. The point here is that different regions will have different economic policies. The currency union remains of course and while would have been costs to a break-up of that, we retain the one-size-fits-all interest rate.
But if monetary policy remains the same, fiscal policy does not. There will be different tax regimes, different ways of engaging with foreign investors, different ways of working with local business communities, and so on. A less centralised state, with different parts of the Union competing against each other to deliver better economic management, will perform better than one where most decisions are taken centrally. Expect the English regions in particular to develop a new sense of identity and assurance.
Politics sets the framework for economic enterprise to thrive – or wither. The UK has on the whole done not too badly in setting that framework, but it has not been an outstanding star. We could do better. The prize now is to use this political scare – and for Westminster politicians it has certainly been that – as a spur for the UK as a whole to lift its game. How do we have better governance for all?