The relief was tangible in many quarters of the British Isles on Friday morning as the Scottish independence question was finally resolved. Bitter disappointment was evident elsewhere when the ‘no’ vote came in. Either way, the union was preserved, but it’s far from business as usual as the United Kingdom moves on after Scotland’s referendum.
The knock-on effect for all of the UK
Pledges were made to Scotland by Westminster in the last days before the vote, and Scots of all political hues will be waiting to see whether the politicians will now deliver on their vows. Former Labour Prime Minister Gordon Brown set out a 12-point plan potentially worth billions of pounds to Holyrood, including measures relating to taxes, investment, jobs, and transport. After the result, David Cameron announced that the other British nations will be influenced, too. The Welsh Government will be given greater autonomy, while Northern Ireland has also been promised more decision-making power over its tax, welfare and spending plans. And England should finally resolve the so-called West Lothian question, whereby members of parliament from Wales, Northern Ireland and Scotland can currently vote on matters relating only to England. All of these changes should mean that businesses across the UK get more say on how their taxes are spent, and could free them from such strong central control in Westminster.
What is Scotland promised?
However, the spotlight remains on Scotland, though the detail of its new devolved powers has yet to be clarified. What seems most likely to change? First, let’s consider Gordon Brown’s promises to Scotland, which had the eleventh hour backing of the three main Westminster parties:
- Taxes collected in Scotland should equal 40 per cent of the Scottish parliament’s spending, rather than 12 per cent at present. This could be achieved by increasing the income tax rate from 10p to 15p.
- Brown suggests that say over National Insurance and corporation taxes shouldn’t be shifted to the parliament in Edinburgh, as he warns that nations could start to undercut each other in an attempt to attract business, and end up creating a “race to the bottom”.
- Scots could be given new borrowing powers so that the Scottish Government can issue its own bonds to finance investment in infrastructure, and borrow £22 billion for capital investment.
- Transport infrastructure could be improved by the creation of a not-for-profit railway company.
- Establishing a Scottish Health & Safety Executive would mean Scotland could set its own workplace safety laws.
- The Government’s back-to-work Work Programme should be devolved to Scottish local authorities to give them the responsibility of handling the jobs market. More employment rights and the administration of tribunal claims would also be put in the hands of Scots themselves.
What businesses want to know
Away from all of the passion and pride inspired by the independence debate, SMEs have had more mundane things to consider. The Federation of Small Businesses commissioned the University of Edinburgh’s Business School to talk to business owners in the run-up to the referendum vote, and asked them to identify the issues that were most important to them in the day-to-day.
- About 95 per cent of Scottish SME owners were most concerned about the state of the business environment, specifically what taxes and regulations they will face in future. Many expressed fear of having a different tax and regulatory regime to the rest of the UK.
- Knowing how long any potential changes would take to come into force was another worry.
- Many businesses wanted policies and legislation introduced that were more favourable towards and tailored for Scottish firms.
- More than six out of ten expected a ‘no’ vote to result in greater powers for the Scottish parliament.
Scotland needs support to achieve its potential
What’s undeniable is that Scottish SMEs do need greater help to boost business development and growth. The country has one of the lowest density’s of private businesses per head of population in the UK, and one of the poorest records in terms of new start-ups, according to StartUp Britain. One of the promises the Nationalists had made was greater support for new companies in Scotland, another was lower corporate taxes to spur inward investment. Certainly, politicians should prioritise the introduction of improved measures to aid Scottish entrepreneurs.
One area that needs real attention is funding for SMEs north of the border. We already work with many fine and successful Scottish businesses – hotels, property rental firms, pubs, and more – but a large number of small companies in Scotland remain under-funded simply because they don’t try to gain access to capital. Recent research from Bibby Financial Services suggested that as many as nine out of ten Scottish firms are not looking for external finance at present. Of the small proportion that was seeking investment, about 80 per cent solely relied on their banks. Most were entirely unaware of the existence of alternative finance.
This means that there’s clearly work for us to do to reach Scottish business owners, and let them know that Boost Capital and others like us are ready and willing to lend money to companies with real plans for growth. The politicians have their part to play as well, and should use their new powers, once they’re delivered, to shape legislation that helps SMEs north of the border to gain access to the funding that they so desperately need.
What the future holds
The question on many people’s lips is whether the UK will go through all of this again in a few years’ time. With 1.6 million people having voted for an independent Scotland, there will be calls from some Nationalists for another referendum in the future. However, business groups, including the British Chambers of Commerce are clear, warning about the disruption and uncertainty that a protracted battle over independence could cause to business and investment prospects throughout Britain.
The next important date to watch is October 16th when Brown has secured a House of Commons debate on the timetable for an enhanced devolution package. Then, the new proposals are scheduled to be confirmed in November, with draft legislation on the table by Burns Night, January 25th. Alex Salmond, leader of the Scottish National Party, has demanded a second reading of a Scotland bill by March 27th next year, so that Scots can see real evidence of action on the changes proposed.
The question of Scotland’s independence may have been settled, but business owners in all parts of the UK are likely to feel the effects of the referendum for some months, and even years, to come. Laws will change, powers will shift, and, one hopes, all voices will be more represented. Great Britain and Northern Ireland remain a United Kingdom, but September 18th has subtly changed its make-up forever.