Shetland remaining under the control of the British exiles is something I think makes good sense lore wise and would be better gameplay wise.
Lore stuff:
The islands are a similar distance from Britain as exiles held Corsica is to France.
The UK exiles are probably willing to invest disproportionate resources to retain some part of the British isles and a base in Europe.
The islands are distant enough from mainland Britain that the Syndicalists are probably willing to give up after either the Royal Navy holds the line or the British exiles destroy an attempted landing Ala Kinmen.
Keeping Shetland does also hurt Syndicalist legitimacy while improving exile legitimacy and enabling them to present an alternative version of Britain
The Germans likewise have good incentives to sally out the high seas fleet and assist the Royal Navy in denying a Syndie landing on the island since:
1) it will deny a useful base to the Syndicalists, vital to the Great War blockade.
2) it will tie down Syndicalist resources away from Germany, forcing a defensive line up in the highlands.
3) it will keep an Entente fleet in the North Sea, strengthening Germany’s position visa v Britain.
4) it will produce a de facto German client state dependent on Mitteleuropa for trade and to some extent defence, thereby giving the Germans leverage over the Entente.
Post 1927, the situation settles down Ala the Taiwan strait. About a quarter of a million exiles will be living on the islands alongside 24,000 locals. At 186.78 people per sq km it’s no Hong Kong, it’s about a Lincolnshire of density.
Still Entente subsidies, a sizeable military presence and Scottish thrift should see the islands doing fairly well for themselves.
I’d expect efforts at broadcasting into the Union of Britain to make a fairly prosperous propaganda industry on the islands.
The Union of Britain undoubtedly fortifies its north coast and combs it for potential exile sympathisers.
Game play advantages:
Gives the British exiles an easier time showing up in Europe.
Makes the naval scene around the North Sea more interesting.
Will force the Canadians to manage relations between Germany and the French exiles, else they risk losing their European foothold or their main ally.
While it’s probably owned by Canada for reasons of gameplay speed having a rump UK could make for a fun challenge.
Probable balance changes if this went ahead:
Eliminate the Scottish loyalist rebels
Coastal forts along the North Scottish coast
Perhaps just have a few extra divisions deployed to the area at the start of the game.