There are three key pillars to Edinburgh’s economy—the university sector, financial services and tourism—which are all dependent on the EU to varying degrees for funding, trade or a skilled workforce. If we do not remain in the single market, there is the potential for those sectors to be undermined, which will impact on the Edinburgh economy.
The Institute for Fiscal Studies produced a report in August entitled “The EU single market: the value of membership versus access to the UK”. The report states:
“Full ‘membership’ of the EU Single market substantially reduces the costs of trade within the EU.”
It continues:
“Whilst any country has ‘access’ to the EU as an export destination, membership of the Single Market reduces ‘non-tariff’ barriers in a way that no existing trade deal, customs union or free trade area does.”
I will address the impact on Edinburgh. Across Scotland, 13,000 EU nationals are studying at higher education institutions. Many of them are based in Edinburgh, where there are four universities. Edinburgh university alone has 4,700 EU undergraduates and another 1,000 EU postgraduate research students who are being supported in their studies by an academic staff, a quarter of which are EU nationals.
Alastair Sim highlighted at the Economy, Jobs and Fair Work Committee meeting on 8 November that there are
“4,600 EU staff in universities, across academic and professional disciplines”.—[Official Report, Economy, Jobs and Fair Work Committee, 8 November 2016; c 25.]
He pointed out that those staff have long-term unanswered questions. If they are given the right to remain, what will happen to their access to public services—will they be able to access them on the same basis as UK citizens?
If salary thresholds are in place for tier 2 visas, researchers at the start of their academic careers would fall beneath those thresholds. Alastair Sim said that we need to ensure that the many early-career people who have modest salaries but huge talent to offer can remain in this country. He also commented:
“Free movement of talent is the life-blood of universities and we do not want it to be restricted.”—[Official Report, Economy, Jobs and Fair Work Committee, 8 November 2016; c 29.]
The university and research sector in Scotland has access to £95 million per year of research funding. Assurances have been given by the UK Government regarding existing funding but what happens post-Brexit? Edinburgh university has identified that Europe is the university’s biggest collaborator and a third of research is co-authored by EU members. If we are outside the single market, how will our universities gain access to EU funding? Will they be junior partners? If so, will they lose the ability to influence future research policy?
Another aspect of the Edinburgh economy is financial services, where it is estimated that 35,000 people are directly employed out of 90,000 across Scotland. A report by the international public policy institute at the University of Strathclyde highlights that
“the financial services industry ... contributes around £8 billion a year to the Scottish economy”.
The financial services sectors that may be impacted by Brexit relate to asset management. Scotland provides asset management services to clients around the world, including the EU. The report notes that
“an investment fund managed in Scotland can attract investors from all over the EU”
and states that, if we were outside the single market, such funds could lose their exemption from national regulations in individual EU countries. It describes how
“Scotland is the leading centre for asset servicing”,
in which large international banks carry out operations for other financial institutions, and states that
“These companies may see a disadvantage with dealing with companies in Scotland if”
we
“no longer have passporting rights.”
In its briefing, the Association of British Insurers states:
“Any future migration policy must enable the employment of high-skilled professionals from both inside and outside the EU.”
Given the difficulties facing the sector, it should come as no surprise that Jenny Stewart of KPMG recently highlighted at the Economy, Jobs and Fair Work Committee that, following the Brexit decision,
“Dublin, Frankfurt and Luxembourg are making a play for financial services institutions.”—[Official Report, Economy, Jobs and Fair Work Committee, 1 November 2016; c 30.]
Tourism is another important part of the Edinburgh economy, with approximately four million visitors a year injecting £1.3 billion into the local economy. The hotel sector is booming, and occupancy levels were running at 92 per cent for most of the summer. However, the Edinburgh hospitality sector depends on EU nationals to service that demand, with 7,000 working in the sector. Why is it that, while most academic studies show that attracting skilled migrants to the country is good for the long-term health of the economy, the UK Government believes the opposite?