- The SNP fell one seat short of an absolute majority, winning 64 of the 129 seats available in the Scottish Parliament, but were able to form a pro-independence coalition with the Scottish Greens.
- The key question is whether U.K. Prime Minister Boris Johnson's Conservative government will block the request for a second independence referendum, which would likely lead to a lengthy court fight.
- The last independence referendum in 2014 saw Scots vote 55% to 45% to stay in the union, but the U.K. has since left the EU despite Scotland voting 62% to remain.
Scottish First Minister Nicola Sturgeon has already set her sights on another referendum on independence from the U.K. after her Scottish National Party won a fourth term in power.
The SNP fell one seat short of an absolute majority, winning 64 of the 129 seats available in the Scottish Parliament, but were able to form a pro-independence coalition with the Scottish Greens, setting up a constitutional battle between Holyrood and the U.K. government in Westminster.
Sturgeon vowed to hold another vote within the first half of her new five-year Scottish parliamentary term. However, the key question is whether U.K. Prime Minister Boris Johnson's Conservative government will block this request, a move the Scottish nationalists would then likely challenge in the courts.
The last independence referendum in 2014 saw Scots vote 55% to 45% to stay in the union, but the U.K. has since left the EU despite Scotland voting 62% to remain. Johnson, a key figurehead of the Brexit vote, remains unpopular north of the border.
Berenberg Senior Economist Kallum Pickering noted that with polling indicating that the once-consistent majority for Scotland to remain in the union has narrowed since Johnson took office, he may use his 80-seat majority in the U.K. Parliament to refuse a second Scottish referendum and avoid becoming the prime minister who oversaw the fall of a 300-year union.
The Scottish Parliament was established in its capital city of Edinburgh in 1999 after the Scottish electorate voted in favor of a devolved legislature, and exercises power over all areas of policymaking that are not "reserved" for the U.K. Parliament under the Scotland Act 1998. However, Westminster retains the power to amend the Scottish Parliament's terms of reference and to extend or reduce its jurisdiction.
"My hunch is that Boris Johnson, arch Brexiteer, a Brexit Conservative party, probably don't think they have a very good chance of winning in a second Scottish independence referendum, and hence what they'll probably do is refuse a referendum if it's asked and force a noisy stalemate, where really nothing will change, there'll be lots of noise and markets really should just look through it — it won't have any serious economic effects," Pickering told CNBC on Friday.
Pickering noted that the British government will expect the Supreme Court to back the decision of the U.K. Parliament.
He suggested that this would be the best outcome for Westminster until another Scottish Parliament election or a U.K. general election offers an opportunity to dent pro-independence parties, or polling shifts decisively against independence.
Conservative politicians have already begun setting out their case against holding another independence vote, with cabinet minister Michael Gove arguing that a "divisive" referendum would divert attention from the pandemic recovery, including jobs and health care.
Although reiterating that she will not seek a public vote until "after the crisis," Sturgeon has said the question of whether the U.K. government will permit a second referendum is "predicated on a lack of basic respect for Scottish democracy."
Pickering noted that should the Scottish nationalists attempt to hold an illegal vote in the event that the Supreme Court does take the side of the U.K. Parliament, it would likely be boycotted by pro-unionist Scots and widely disregarded as illegitimate, undermining their efforts.
In the unlikely case that Westminster does green light a referendum, however, the risk of a break-up of the U.K. would rise, with current polling on independence too close to call.
"While Scotland makes up only a fraction of U.K. GDP (c7%), a hard land border between England and a Scotland that rejoined the EU would exacerbate the economic damage from Brexit significantly," Pickering said.
"In addition, the serious reputational damage to the U.K. on top of many years of uncertainty as lawyers unravel the 300+ year union between Scotland and England would further hurt the U.K.'s attractiveness as a destination for international investment."
Johnson has called a summit of Scottish, Welsh and Northern Irish first ministers to discuss a collaborative approach to Covid recovery. Meanwhile, Conservatives have been highlighting the benefits to Scotland of the U.K.'s vaccine rollout and policies such as the furlough scheme, sticking to a narrative of unity in crisis.
However, as the U.K. emerges from the shadow of the pandemic and some sense of political normalcy is restored, this approach is likely to have a "limited shelf-life," according to Mujtaba Rahman, managing director for Europe at Eurasia Group.
"Johnson and Sturgeon are now at the start of a game of constitutional chess but neither is keen to make the first move," Rahman said in a research note Sunday.
"Both know the crunch issue of a referendum is likely to end up in the Supreme Court but neither wants to take the first step towards that outcome."
He suggested that Johnson's instinct would be to delay the referendum until after the next U.K. general election slated for 2024, but which Rahman said is increasingly likely to be called in 2023, with the current strength of Conservative support leading pundits to expect the prime minister will look to consolidate another five-year term.
The SNP currently holds 44 of Scotland's 59 Westminster seats, and any reduction of that may enable Conservatives to tout a rejection of Sturgeon's referendum mandate.
U.K. ministers' legal advisors believe that their trump card will be the Scotland Act 1998, which created the Scottish Parliament, which dictates that the constitution is a "reserved matter" for Westminster, according to Rahman.
"They will argue that a referendum itself does not change the constitution because the change would depend on the result," Rahman predicted, noting that Sturgeon may hold an "advisory referendum" to test the national mood. Should it show support for independence, she could then leverage this to force the U.K. government's hand.
"In their initial skirmishes, Johnson and Sturgeon are both proceeding cautiously as they stake out their ground; they know their battle will likely take years to resolve," said Rahman, noting that one U.K. government source had acknowledged that "it is going to be a long game."