U.K. bonds still strong despite Brexit, Scottish secretary says

By Elisabeth O'Leary

EDINBURGH (Reuters) - Britain's impending exit from the European Union does not weaken the case for the union of Scotland with the rest of the United Kingdom despite its difficulties, Britain's Secretary of State for Scotland says.

"The vital union for Scotland's interests remains the United Kingdom," David Mundell was due to say on Saturday on the eve of the two-year anniversary of the Scottish independence referendum on September 18, according to the advance text of a speech.

Scotland, one of the UK's four member nations, voted to stick with the EU in June, clashing with a vote to leave in Britain as a whole and causing much disgruntlement as the process of renegotiating 40 years of trade and political agreements are hammered out.

Edinburgh's pro-independence devolved government has pledged to uphold Scotland's EU membership in whatever way it can, and is holding out the possibility of a new independence drive if Scotland's EU interests are not protected.

"The fact is that an independent Scotland's membership of the EU would be very different from the current arrangements," Mundell was due to tell an audience in Glasgow.

As a new member Scotland would be expected to join the euro, the EU's single currency, and leave the pound, the speech added.

"It is the UK's fundamental stability, even in the context of Brexit, which makes the case for the union so compelling," he will say, citing ties of trade, culture, language and history.

The Scottish administration argues the opposite, saying many people voted to stick with the UK by a 10 point margin in the 2014 independence referendum because they were told that it was the only way to guarantee EU membership. After the Brexit shock, the UK can no longer be considered a safe harbor, it says.

But several polls this month show an only slight increase in support for Scottish independence since 2014, not enough to win.

The ruling Scottish National Party is carrying out a huge door-to-door survey in the coming months to determine exactly where and how there is support for independence.

According to Mundell, Scotland would also face the prospect of a "hard border" with the rest of the UK if Britain is not an EU member and Scotland is.

Scottish trade with the rest of the UK is around four times the size of its 12 billion pounds ($15.61 billion) of exports to the rest of the European Union.

"As well as providing Scotland with this essential economic stability, the Union has also proven itself to be adaptable in the face of changing circumstances," the speech said.

Mundell said the Scottish government, which has talked of a "lost decade" for Britain, should stop "doom-mongering" about Brexit while a new relationship is being hammered out.

Alex Salmond, the former Scottish first minister, on Friday predicted his successor Nicola Sturgeon would call a referendum in about two years.

In an interview with RT, the English-language TV channel formerly known as Russia Today, he said he expected London would not be "wise enough" to be able to assure single market membership as part of its negotiations with the EU.

As that is a condition Sturgeon has talked about for Scotland, she would call another independence vote "in roughly two years' time."

Britain is not expected to trigger the formal exit process until after the end of this year.

(Reporting by Elisabeth O'Leary; Editing by Tom Heneghan)

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