By Ian Fraser
Published: The Daily Telegraph
Date: 3 October 2014
The outcome of the referendum has brought certainty to Scotland’s economy, but what are the long-term consequences of the ‘No’ vote?
Most Scottish businesses breathed a sigh relief when it became clear the Scottish electorate had rejected independence by 55 per cent to 45 per cent. The outcome brought certainty. Business now knows where it stands – in so far as it can continue to use the pound, and that monetary and regulatory policy will continue to set by London.
Uncertainty over Scotland’s economy since the referendum campaign began last year reached its height on September 8 after an opinion poll suggested the SNP-led pro-independence group were on course to win. That triggered a burst of activity, including an announcement from all five large Scottish banks that they would move their headquarters to England in the event of a “Yes” vote. However, after the “No” vote was announced their plans were dropped, most publicly by RBS.
A significant amount of economic activity – including property deals, mergers and acquisitions, foreign direct investment and long-term investment – has been put on hold as a result of the uncertainty surrounding the referendum. But David Watt, executive director of the Institute of Directors Scotland, says the decision of Scots to remain in the UK had “unblocked the pipeline with immediate effect”.
“We are mightily relieved. We are Scottish-based, but very much a UK company,” says Alastair MacMillan, managing director of White House Products, an Inverclyde-based supplier of oil hydraulic pumps. “Only 5pc of our sales are in Scotland and none of our suppliers are up here. If it had been a “Yes” vote we would have had to relocate the majority of our business to the North of England and we had already identified some sites there.”
Scotland’s SMEs still face some political risk due to uncertainty over the additional powers for the Scottish parliament that were promised by the “No” coalition during the campaign, as well as from a possible in-out referendum on the EU in 2017.
Ricky Nichol, chief executive of Edinburgh-based telecoms firm Commsworld, says the extra powers for Holyrood were “the joker in the pack, though they may well turn out to be built on sand”.
BDO tax partner Richard Rose says possible divergent tax rates north and south of the Scotland-England border would be hazardous for firms based on either side of the frontier as they would have to contend “with an uneven playing field when competing commercially or vying to recruit and retain top talent”.
Rather than a Quebec-style ‘Neverendum’ – endless plebiscites about Scotland’s future status – John Longworth, director general of the British Chambers of Commerce, has called for decisiveness: “Businesses will now expect Westminster and Holyrood to reach a devolution settlement that is clear, fair to both sides and swiftly executed.” He called on all the political parties to put the fractiousness of the referendum campaign behind them and focus on economic growth.
David Frost, CEO of the Scotch Whisky Association, says, “We welcome the stability that this choice brings and urge politicians of all parties to work to bring our country together. The Scotch whisky industry is determined to play a leading role in shaping discussions that are fundamental to the future success of our industry and our nation.”
Scotland is very much open for business and all visitors are welcome
William Macleod, director of the British Hospitality Association in Scotland, said that coverage of the referendum campaign in international media – coupled with the coverage of the Commonwealth Games, the Ryder Cup and the Year of Homecoming this year – has raised Scotland’s profile, which is good for his sector: “England remains Scotland’s most important tourism market and we must send out the message that Scotland is very much open for business and all visitors are welcome.”
In the energy sector, Tony Ward, head of power and utilities at EY, says the “No” vote ensures energy policy remains uniform throughout the UK. However Niall Stuart, chief executive of Scottish Renewables, would prefer if the devolved Holyrood administration had more of a say. “Scottish Renewables is calling for a new joint Scottish and UK government energy policy that balances the interests of Scotland within a single GB energy market,” he says.
Commsworld’s Nichol is quite a rare business voice in that he says he would have preferred a “Yes” vote, believing this would have given the Scottish government more powerful levers to adjust economic policy to suit the needs of the Scottish economy: “I believe independence would have been preferable as the status quo is not working that well for Scotland.”
One possible downside of the recent “No” vote is that interest rates are now expected to rise much earlier than had there been a “Yes” vote. Some economists believe the Bank of England may raise them as early as November. The bank would have had to postpone any rate hikes if the Scots had voted to end the UK.
This article was published by the Telegraph on 3 October 2014