The United Kingdom’s departure from the European Union could potentially spur Scotland’s seafood industry to generate GBP 540 million (USD 721.7 million, EUR 612 million) in additional revenues and provide thousands of new jobs, or it could lead to a GBP 85 million (USD 113.7 million, EUR 96.4 million) reduction of the industry, according to new analysis published by the Scottish government.
With the fisheries sector expected to be significantly affected by Brexit, the research provides likely impacts of different scenarios for total allowable catch (TAC) or quota sharing and trade arrangements between the United Kingdom and the E.U., to better understand the potential impacts of different arrangements on fishing, aquaculture, and processing, and potential knock-on impacts on other sectors of the economy.
Using four hypothetical scenarios to reflect changes in three drivers of international trade in seafood – tariffs, non-tariff measures, and production levels – the research suggests that Scottish and U.K. seafood output would benefit from continued free trade, while the introduction of tariffs and non-tariff measures relative to the status quo would have negative impacts on both U.K. and E.U. output and trade flows. It also found that any potential benefits from increased fishing quotas would reduce with increasing tariff and non-tariff measures once the United Kingdom leaves the European Single Market and the Customs Union.
The potential impacts of these scenarios were explored for 10 different fish and shellfish species: Cod, crab, haddock, hake, herring, mackerel, nephrops, saithe, salmon, and scallops.
The scenarios modeled were:
1. Removal of all tariffs on U.K. exports to all countries and the removal of U.K. tariffs on imports from all countries, a small reduction of non-tariff barriers between the United Kingdom and non-E.U. trading partners, and a reallocation of fishing quotas in the United Kingdom’s favor based on the zonal attachment principle.
2. Tariffs on U.K.-E.U. trade flows similar to the current EU–Norway agreement, a modest increase in non-tariff measures between the U.K. and the E.U., and a reallocation of fishing quotas in the United Kingdom’s favor based on the zonal attachment principle, while maintaining current (baseline) trade arrangements with the rest of the world.
3. World Trade Organization (WTO) Most Favored Nation (MFN) tariffs imposed on bilateral trade between the United Kingdom and the E.U., together with a larger increase (compared to Scenario 2) in non-tariff measures, and a reallocation of the quotas under the zonal attachment principle as in the earlier scenarios, while maintaining current (baseline) trade.
4. MFN tariffs applied between the United Kingdom and E.U., and with non-E.U. countries. Non-tariff measures increase as in Scenario 3, but there is no reallocation of quotas. Quota allocations remain the same as currently between the United Kingdom and E.U.
The analysis finds that the direct impacts on Scotland's seafood industry of Scenario 1 are an increase in economic output of around GBP 320 million (USD 427.7 million, EUR 362.7 million), with the majority coming from the processing sector. The indirect impacts would add a further GBP 170 million (USD 227.2 million, EUR 192.7 million) and the induced impacts another GBP 50 million (USD 66.8 million, EUR 56.7 million). As such, the total impact would be a GBP 540 million (USD 721.7 million, EUR 612 million) or 21 percent increase in output across the Scottish economy. This would be associated with a total increase of 5,000 full-time equivalent (FTE) jobs and GBP 210 million (USD 280.7 million, EUR 238.1 million) in GVA, including direct, indirect and induced effects.
In comparison, the direct impacts of facing MFN tariffs and increased non-tariff measures – with no reallocation of quotas (Scenario 4) – would be a decrease in direct economic output in Scotland of around GBP 50 million (USD 67 million, EUR 56.6 million). Again, most of the impact would be on the processing sector. The indirect impacts would subtract a further GBP 27 million (USD 36.1 million, EUR 30.6 million) from Scotland’s economy and the induced impacts another GBP 8 million (USD 10.7 million, EUR 9.1 million). The total impact would be a GBP 85 million (USD 113.7 million, EUR 96.4 million) or 3 percent decrease in economic output. This would be associated with a decrease of 429 FTE jobs (direct, indirect, and induced), of which 44 percent would be in the processing sector and 43 percent to the fishing sector. The total GVA under Scenario 4 decreases by GBP 20 million (USD 26.7 million, EUR 22.7 million).
The sectors of the economy that would be most affected by the indirect effects (purchases by the sectors directly affected) are fishing, fish, and fruit processing, and aquaculture sectors. This is because the sectors purchase from each other and within themselves.
Rural Economy Secretary Fergus Ewing said the report confirmed that reduced access to E.U. markets could “significantly harm” Scotland’s seafood sectors, and put those businesses reliant on the speedy supply of fresh product to European markets at risk.
“The modeling of these four different scenarios highlights the complexities of Brexit for our seafood industry and in the absence of full E.U. membership, maintaining membership of the European Single Market and remaining in a customs union is the ‘least worst’ outcome for our fishing, aquaculture and processing sectors, Ewing said. “The report also suggests that there is unlikely to be an immediate gain for the fishing industry with any quota increases for the fleet only likely to be achieved through international agreement following negotiation over time with coastal state partners, and those economic gains could be reduced through the impact of tariffs on trade."
Ewing said based on the studies, Scotland will therefore continue to push to remain in the European Single Market and a customs union with the E.U, "which is essential to protect and support the Scottish seafood sector, both at sea and onshore."
"We will also reiterate our calls for the U.K. government to guarantee that it will not bargain away access to Scottish waters and resources to secure other U.K. interests,” he said.
