Tonight the winners of the Scottish Business Awards will be announced, with some of Scotland’s most successful business figures vying for the top gong, the Entrepreneur of the Year. But alongside the usual professional rivalry, one topic that is bound to dominate the glitzy event in Edinburgh is the Scottish independence referendum vote that is set for September. And the question on many people’s lips is likely to be what does it really mean for companies in Scotland?
Five months after the vote was officially confirmed, it’s something that most business owners still can’t answer. There may be a while to wait yet until voters go to the polls, but the owners of SMEs north of the border are beginning to voice their frustration at the continued lack of clear business-related arguments for and against independence. We were among the first to talk about this problem when we discussed the independence issue on this blog back in January. But, today, with just four months to go to polling day, the two campaigns still have to persuade many firms that they can really articulate why independence would be a genuinely good or bad thing for Scottish business.
Recent research from the Scottish Chambers of Commerce (SCC) found that 45 per cent of SME owners in Scotland thought the independence debate so far had been poor, with one in ten saying it was dismal. The Scottish and British governments, as well as the Better Together campaign for union and the Yes campaign of the nationalists were deemed to be as unclear in their arguments as each other, with them all judged ‘not very useful’ in their contributions thus far by about a third of firms. Yet, despite this, most people have already decided how they will vote in the autumn. More than 90 per cent of Scottish business owners have made up their mind about the referendum question, according to a study by business group Ingenious Britain, even in the face of little persuasive evidence from the rival political camps.
SMEs are quite clear about the issues that are important to them. In the SCC poll they singled out the following topics in particular: business regulation; tax; currency; and business rates. But business owners insist that the politicians and campaigners have failed to address these areas adequately and, vitally, how an independent Scotland would affect them.
The pro-independence lobby says that leaving the union would create opportunities for Scottish businesses, since Scotland would be able to determine its own SME-related regulation, rather than having that imposed by Westminster. This appears to be one point on which many firms agree with the nationalists – a fifth of SMEs say that more Scotland-centric policies coming from a Scottish government is the major attraction of voting for division from England, Wales and Northern Ireland, according to the SCC research. The unionists point out that they’re all for Scotland being given more powers, while still staying part of the UK. But, either way, it’s the lack of detail around the business case more broadly that is having a markedly negative effect on the attitudes and plans of some Scottish firms. The SCC study revealed that:
- One in ten enterprises is thinking about relocating away from Scotland – eight per cent are definitely planning to move away, and five per cent is considering boosting existing English operations or setting up an offshoot based in England.
- One in four Scottish firms has already changed their business plan in preparation for the independence vote, with almost half saying that their strategy would have to change if Scotland becomes an independent entity.
One of the greatest worries about proposed independence for businesses in Scotland is the currency. The possibility was raised earlier this year of Scotland being withdrawn from Sterling if it votes for independent status, with the Chancellor George Osborne saying that the Scots would not be able to share the pound if they moved away from the union with the rest of Britain. His uncompromising position was backed by both Labour and the Liberal Democrats. The prospect of having to adopt another form of currency is not one that many Scottish business owners relish. If Scotland does go solo, the majority – 62 per cent – of firms would want to retain Sterling as their currency, the SCC found. Understandably, companies that do most of their trading with the rest of Britain and further afield in Europe are the most likely to be concerned about the currency issue.
Business groups appear to be in as much of a pickle about proposed independence as the voters and campaigners. The Confederation of British Industry (CBI) started out as a registered and committed campaigner against Scottish independence, but the body caused some surprise in late April when it did a U-turn, saying that it should remain a non-political organisation. In fact, several major universities, broadcasters, including the BBC, and the Law Society of Scotland had threatened to quit their CBI membership over the independence issue, fearing for their own political neutrality through association with the UK’s most influential business organisation.
The British Chambers of Commerce (BCC) recently entered the fray by quizzing its members outside of Scotland on their opinions about independence. Most non-Scottish businesses – 85 per cent – think that Scotland should remain part of the UK, but a quarter agreed that Scots should be given more autonomy if they stay in the union. The Scottish branch of the Institute of Directors also insists that it’s partisan, but it has highlighted several questions that the campaign groups should answer:
- Would existing generous tax incentives for businesses under the UK system continue in an independent Scotland? Indeed, could they be improved?
- Will the Scottish Investment Bank remain in place if independence occurs? How will other investment in high growth firms be encouraged in a stand-alone Scotland? And how will those looking to raise capital be ensured that they can find it in an independent Scotland?
- Will there be a Scottish version of the Department for Business, Innovation, and Skills? What would its role and responsibilities be and how would it be financed?
- What would be done to ensure funding streams for SMEs after independence? How can banks be encouraged to lend to entrepreneurs under a new Scottish system?
Most of these quite specific questions have yet to receive anything other than a very cursory answer from the campaigning groups. And many businesses in Scotland are sick of the limbo in which they find themselves as a result. Almost four out of ten firms questioned by the SCC said that that it was this lack of certainty, plus the potential time it would take to transfer to independence, that they perceived as the biggest risk of voting yes on September 18. Now, we know from talking to our customers north of the Scottish border, and elsewhere, that entrepreneurs have a greater appetite for risk than their employed counterparts – after all, it goes with the territory of running your own company. But businesses also crave some certainty in order to be able to plan ahead and protect their continuing operation. With no concrete information on which to base their decisions, it would seem that many people are making up their minds on the forthcoming vote based on gut instinct. With more than a third of a million businesses currently operating in Scotland, the politicians are missing an opportunity to win over the important, sizeable, and very influential business vote, one way or the other. It’s long overdue that they articulate clearly what Scottish independence means in practical terms for SMEs in Scotland – for good or ill.