Scottish Independence: What effect on economy?

Loanhead Miners U-16s await their turn with the bucket. Picture: Lesley Martin

Loanhead Miners U-16s await their turn with the bucket. Picture: Lesley Martin

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INSURANCE giant Standard Life stole the headlines back in February when it became the first major company to signal it could relocate its operations from Edinburgh to England in the event of independence.

The Capital-based firm, which employs 5000 people north of the Border, most of them in Edinburgh, said it had started putting in place contingency plans, including setting up new companies outside Scotland, to which parts of its operation could be transferred in the event of a Yes vote.

The move has been seized on by the No camp as evidence of a wider threat posed by independence to jobs and the economy.

Edinburgh, with its high proportion of financial services companies, is the biggest focus of attention.

But will the company stay or will it go?

Royal Bank of Scotland – which also employs thousands of staff here and has its headquarters at Gogarburn – has said officially that independence could have a “material adverse effect” on its business, though chief executive Ross McEwan has also said the bank, which is 80 per cent state-owned, could “adapt” its business in the event of independence.

Just last week, 130 business leaders signed a letter voicing their concerns about the uncertainties surrounding independence – including currency, regulation, tax, pensions, EU membership and support for exports.

But Graham Birse, of Edinburgh Napier’s Business School, says: “The perspective of most businesses other than those that have made a specific declaration, like Standard Life, is they can see the upside and the downside, depending on their sector, their customer base, their geography and ownership.

“They will each have done some general assessment of both scenarios.

“But in most cases they will not have done anything more specific because getting to the facts of what an independent Scotland or Scotland in an ongoing union might look like in a post-referendum world is very difficult.

“Most organisations are saying they don’t want to participate in the political debate and it’s a matter for individuals.

“But when it comes to September 19 and the stoor has settled they will blink and say ‘This is the result: what does it mean?’ Then the calculators will be out and real numbers will be getting crunched.”

Former chancellor Alistair Darling, Labour MP for Edinburgh South-West, has argued independence would be as big a blow to the Capital as the 2008 banking crisis. He says: “If you look at the private sector jobs in Edinburgh, they are nearly all driven by the financial services sector. It’s not just people who work in Standard Life or RBS, these people spend money in shops and bars and restaurants.

“The influence of the financial services sector on Edinburgh’s economy has been immense for 200 years. The problem is once one firm goes, the risk is another goes and you start losing the critical mass of people, the expertise you are dependent on.”

And Danny Alexander, Chief Secretary to the Treasury, has claimed Edinburgh would suffer more than any other part of Scotland if there is a Yes vote.

He says: “The economy of Edinburgh is the part of the Scottish economy that benefits most from being in the UK.

“The financial services sector, the insurance and pensions sectors are so strong in Edinburgh, serving customers across the whole of the UK, and it benefits from the strong and stable regulatory framework across the UK.”

The No campaigners acknowledge that even if big companies decide to relocate their HQs it would probably not mean a mass exodus of jobs. But they say it would change Edinburgh’s status as a financial centre.

Decisions being taken elsewhere do make a difference, they insist. “If they are reorganising any aspect of their work, it’s not done from an Edinburgh-centric point of view,” says one. “When a company is headquartered in a certain location it influences their decision-making and if there are to be job losses they are more likely to be elsewhere.”

But Rachel Holmes, an Edinburgh-based lecturer in finance, who worked for 18 years in financial services, does not believe companies will flee the Capital if there is a Yes vote.

“They won’t leave unless something dramatic changes that makes them need to leave,” she says.

She plays down the idea that firms would be forced to relocate due to European rules requiring that a bank should have its registered office in the country where its largest customer base is located. It would be easy enough, she argues, to establish a presence south of the Border without affecting operations here.

And she says the fact these companies have most of their customers in England is not a problem. “They already trade across dozens of countries – one more is just not going to make a difference.

“Tiny Luxembourg is one of the biggest financial services centres in the world and trades across borders every day. Places like Egypt and Turkey have currency issues all the time I don’t understand why companies can cope with that but supposedly not an independent Scotland.”

She believes very few if any jobs will leave.

“If you take Standard Life with perhaps about 3000 staff in Edinburgh, either they would have to persuade all these people to move south and start their lives again or recruit and train people in all their policies, procedures and systems I can’t see why any company would want to do that.

“If there’s a Yes vote, we’ll wake up on September 19 and go to work as normal. Any change that happens will be gradual and consulted on. Any government is going to want votes – they won’t want businesses to leave, they will be playing the same political games London play, except with the Scottish economy in mind.”

VIEWS FROM RIVAL CAMPS

Yes: Marco Biagi, SNP MSP for Edinburgh Central

ANY independent government in Edinburgh will have more interest in doing whatever is needed to create and keep business and jobs in Scotland than Westminster governments ever have.

The white paper proposes targeted help at key areas like science and tourism – both crucial for Edinburgh.

In financial services, there are far-sighted backers of independence, including Sir George Mathewson, RBS chief in the golden pre-Fred Goodwin age. Those looking for a smaller country outperforming a larger neighbour in financial services need look no further than Luxembourg or Switzerland – Luxembourg did so while in an 80-year currency union with Belgium.

With a UK Foreign Secretary who believes in EU withdrawal, a No vote threatens Scotland’s vital export businesses. Only a Yes vote safeguards our place in that continent-wide market of 500 million customers.

No: Sarah Boyack, Labour Lothian MSP

AS Scotland goes to the polls later this month thousands of jobs in Edinburgh, and the livelihoods that go with them, are at stake.

The city is home to the headquarters of global companies and financial services built on a British consumer base. Eight out of ten mortgages and nine out of ten pensions sold in Edinburgh are for people from the rest of the UK.

We have an international reputation in the renewables sector that resulted in the successful bid for the Green Investment Bank. Again, the sector benefits from being part of the UK with Scotland receiving a third of the UK subsidy for renewables.

Our universities, which are critical to our economic future, are among the best in the country and punch well above their weight when it comes to competing for UK research income.

The last thing we need in Edinburgh and the Lothians is the economic uncertainty separation would bring.

‘Bright future whatever happens’

WHATEVER the referendum result, the Gill family has cast a vote of confidence in the Capital.

After five years living in Switzerland, Lia Gill, husband Allan and son Jack have moved back to Edinburgh on the brink of the big vote and opened a cafe, Coletti and Co, in Lothian Road – right opposite Standard Life’s headquarters,

Allan says: “I’m not saying I’m for or against – I don’t know which way I will vote.

“But no matter what happens, Scotland has a bright future. We would not have come back and opened a new venture if we did not believe that.”

Lia was a senior executive with a multinational firm and Allan a journalist, but they always dreamed of opening their own cafe – and where better than in Edinburgh, where they both grew up?