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What has been announced?

Nicola Sturgeon has said she wants to hold a second referendum on Scottish independence between autumn 2018 and spring 2019. Although Sturgeon could have waited to make the announcement on Friday, when the Scottish Nationalist Party holds its spring conference, she chose to make it the day before Theresa May was widely expected to trigger Article 50 – thereby linking the issue directly to the UK’s withdrawal from the European Union. It now seems unlikely that May will trigger Article 50 until the end of March, although whether this comes as a result of Sturgeon’s announcement remains to be seen.

What happens next?

It is not within Nicola Sturgeon’s power to hold a referendum as the First Minister readily acknowledged in her speech today. Instead, she will seek approval from the Scottish Parliament to enter into discussions with the UK Government on the details of a Section 30 Order. Section 30 of the Scotland Act, if devolved to Holyrood, legally allows the Scottish Government to legislate in an area reserved to the Westminster Parliament. In 2012, Section 30 negotiations resulted in the Edinburgh Agreement which set out the terms – including the timing – of the last Scottish referendum. Crucially, for this to be granted, the House of Commons and the House of Lords must approve the process.

Will the referendum take place?

The UK Government will be wary about ruling out a referendum altogether and statements from Number 10 and UK ministers have carefully avoided doing so for fear of playing into the SNP’s ‘grievance narrative’, which some suspect is Sturgeon’s real aim. Nevertheless, the PM and the whole UK Government views a second referendum as a political problem and will at the very least seek to use the legislative process to insert caveats and stipulations on the timing of an independence vote.

When will the referendum take place?

This may become the biggest bone of contention. The SNP have used Brexit as the catalyst for the referendum and want a vote to take place before Britain’s withdrawal is complete, ostensibly so an independent Scotland could retain ‘continuity’ of EU membership. This argument is not without significant legal and political problems, given that the European Commission has already referenced the Barroso doctrine, a legal view set out by the former EU Commission President that if one part of an EU country became an independent state it would have to apply for EU membership. A formal application itself would also not be guaranteed to succeed, as politicians in Spain have previously indicated their government would oppose any special arrangement for Scotland for fear of encouraging its own separatist movements in Catalonia and the Basque Country.

In addition, the UK Government will be adamant in opposing any independence poll during the negotiations. If a referendum is to take place, it will almost certainly be delayed until after 2019, and the UK Government may seek to push it beyond 2021 – by which time Scottish elections may well have changed the composition of the Scottish Parliament to the detriment of the SNP. Politically, both May and Sturgeon arguably have a common interest in kicking the referendum into the long grass, as either would almost certainly have to resign if they lost the vote.

How strong is support for Scottish independence?

Most polls have shown a majority in Scotland support remaining in the UK. Demanding a referendum at a time when there is only minority support for independence is therefore a major gamble by the SNP leader, who may have felt pressured to do so by internal party politics. Nevertheless there is growing unease in Westminster that Brexit has changed the context of a second referendum.  Privately Westminster insiders believe that economic arguments will not have as much traction as they have done previously.

What will the key arguments be?

Expect a re-run of previous arguments regarding what Scotland’s currency would be, whether Scotland would be granted EU membership and the impact of independence on the public finances. The most significant impact is likely to be on the SNP’s arguments.

The SNP’s economic case, as presented in 2014, has all but collapsed. Then, Finance Secretary John Swinney promised a ‘second oil boom’ with former First Minister, Alex Salmond, predicting that oil boom would amount to £57bn. Since the first referendum oil receipts have collapsed by as much as 99 per cent. Last week, the Chair of the SNP’s Growth Commission, former MSP and RBS economist Andrew Wilson, stated oil should not form the ‘basis’ of the SNP’s case during a second campaign.

The SNP’s hard sell on the economy is made even more difficult due to their pledge to re-join the European Union. The EU Growth and Stability Pact states that member states should aim to run a deficit no higher than 3 per cent of GDP. Scotland’s currently stands at 9.7 per cent. Opponents of independence will argue secession from the UK will result in years of eye watering austerity. This may yet prove insurmountable for the SNP.

However as we have indicated will economics matter as much? The SNP calculates that Brexit has psychologically changed the minds of voters. Sturgeon will frame the debate as one of the heart where Scotland has a choice of attaching itself to an insular philosophy advanced by a right-wing Tory Government, or a Scotland which is outward looking, progressive and pro-European. Set against a backdrop of Brexit and President Trump, it is possible that a more populist pitch could still get the SNP over the line.

This being said, the political dynamics have shifted since 2014. The Scottish Conservatives are now the official opposition at Holyrood and, according to polls, Ruth Davidson is more popular than Nicola Sturgeon. Whilst the SNP leader may seek to frame the debate in this way, there is a danger, on her part, that it may not hold the same weight that it once did. As Sturgeon seeks to control the narrative a confident, and resurgent, Scottish Conservative Party will hammer home the economic risks of independence in the full knowledge this won the day in 2014.

What is the impact on business?

Today kick-starts a long campaign that see business pressured to articulate – or indeed not to articulate – a clear position on the independence question, which is in turn bound up with Brexit. Downing Street’s statement in response to Nicola Sturgeon provides business with some cover but the issue is not going to disappear. If anything, it will become more of a talking point over the next twelve to eighteen months. And while economic arguments will dominate, business will need to recognise that populist arguments may have more of a bearing on a contest than they have in the past. A second referendum is a far trickier proposition for business to navigate and one where the outcome is very uncertain

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