The impact of the Brexit vote on Scottish consumers has been well documented, with the plummeting pound sending the cost of everything from Walkers Crisps to Birds Eye fish fingers on an upward trend.
But while the inevitable inflationary pressures a weakened currency brings will be bad for householders generally, could one of the unintended consequences be that it makes the case for Scottish independence more appealing?
One of the main stumbling blocks to the first independence referendum was the SNP’s inability to articulate the currency an independent Scotland within Europe would use.
Given that the vote took place at a time when one euro was worth just 80 pence, it is understandable that the nationalists stopped short of recommending a currency union with the rest of the EU, even though maintaining monetary union but nothing else with the rest of the UK was hardly satisfactory.
Now that the UK’s vote to leave the EU has sent the pound and the euro closer to parity, with a euro currently worth around 90 pence, could joining the single currency be an easier sell during a second independence referendum? And if it was would that make the case for independence more clear cut?
Professor John Curtice of Strathclyde University said that sterling’s weakness does make the case for joining the single currency more viable, adding that “the UK more broadly would only ever look to join the euro if the pound was weak and the euro was strong”.
The reason for this is that, even though an exchange rate would be applied to ensure the pots of euros being swapped for pots of pounds had the same intrinsic value, psychologically, people would always assume they were getting less if the value of one euro was significantly lower than the value of one pound.
With the two currencies worth practically the same, however, it is much easier for the public at large to quantify them - and therefore for consumers to sniff out the best-possible deals.
Adam Cole, head of foreign exchange strategy at RBC Capital Markets, said one of the main benefits of currency union in general is that it makes it simpler for consumers to compare prices across borders, ultimately giving them much wider choice.
“Greater pricing transparency should also increase competition, to the advantage of Scottish consumers,” he said.
“This was something that seemed to be apparent as the Canadian dollar hit parity with the US dollar a few years ago - it suddenly became clear Canadian consumers were being overcharged for some goods and they could hop over the border and shop in the US.
“Maybe parity makes this positive effect from euro membership clearer.”
While being able to shop in markets across Europe without having to factor in the cost of foreign exchange would be a clear advantage to consumers, the main downside of joining the single currency would be that interest rates would be set by the European Central Bank as opposed to the Bank of England.
This is important because if inflation is thought to be getting too high - as it is likely to do in the UK in the coming months - central banks can raise rates in a bid to cool demand and slow the pace at which prices are rising.
Samuel Tombes, chief UK economist at Pantheon Macroeconomics, noted that as the English and Scottish economies are “very closely aligned” the actions taken by the Bank of England are generally sensitive to the UK as a whole, while the European Central Bank would be unable to take much notice of Scotland.
“Within the eurozone interest rates have been too high for some of the southern European economies because they are set for the zone as a whole and Germany and France have been very strong economies,” Mr Tombes said.
“Scotland would be five per cent or so of the eurozone in terms of economic output so would have little weight when the European Central Bank was coming to set interest rates,”
The other issue is whether people think the pound will remain at its current low level for long or whether they think it is a post-Brexit blip that can be reversed.
“International investors are very concerned that we’re going for a hard Brexit and whether the pound recovers depends on the agreement the UK can find with the rest of Europe,” Mr Tombes said.
“If it’s a soft Brexit then the pound could recover substantially, but if we’re going for a hard Brexit with trade barriers then the currency could fall further.”
If that were that were the case then joining the single currency may not be such a bad idea.
As Professor Curtice said: “If the markets believe that the future prospects of the UK economy are now sufficiently bad that the devaluation reflects what’s going to happen then we’ll be stuck at parity.”
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