Last Saturday, Scots the world over were raising a dram to Robbie Burns to mark the anniversary of the birth of Scotland’s national poet. And one topic that’s likely to have enlivened many celebrations is that of Scottish independence, set to be decided in a national referendum this autumn.
It’s a controversial subject, with the nationalists arguing that Scotland would be better off breaking away from the United Kingdom, while those in the No camp cleave to the union. But what do the alternatives mean for businesses north of the border? Critics of independence complain that business leaders have been too slow to express opposition to the split, allowing the nationalist leader Alex Salmond to dominate the argument. Others say that a middle path of greater devolved powers for the Scottish government could be the solution.
Boost Capital spoke to those campaigning on both sides of the debate to get their views on what Scottish independence means for SMEs.
The arguments for independence
Business for Scotland is a business network and think-tank set up specifically to inform the Scottish SME community about the merits of independence. It has the backing of the official Yes Campaign and was set up by care home entrepreneur Tony Banks who believes that the current system of government is too London-centric, short-term, and biased towards businesses south of the Scottish border. Those who favour independence for Scotland say:
- Pro-independence politicians promise Scottish SMEs a simpler tax system, reforms to the labour market to improve staff-employer relations, and increased migration to balance the country’s demographic needs, specifically its ageing population.
- The union causes wealth generated in Scotland to drain south. This key nationalist argument asserts that, far from being a poor cousin to England, Scotland’s central belt generates as much wealth as London and the South-East, but its economic surpluses are absorbed into the UK Treasury. In other words, what it contributes in taxes is not matched by what it receives in proportionate UK spending. Research by pro-independence group the Jimmy Reid Foundation suggests that a stand-alone Scottish economy would be £148 billion better off than if yoked to the economies of England, Wales and Northern Ireland.
- Scotland already has a rich and diverse economy, backed by strong overseas exports, and this strong base could be built upon further. As well as the oil and gas sector, the Scottish economy includes £21.4 billion in the construction industry, £11.6 billion in tourism, and a £39 billion annual turnover in manufacturing. The country’s exports are worth £9.5 billion a year, with food and drink, then coke, petroleum and chemicals, topping the tables of export sectors. The Scottish government has set a target on independence of increasing exports by 50 per cent, creating more than 100,000 new jobs. It would also support greater exports through a Scottish diplomatic and trade service.
- The oil industry has even greater potential for an independent Scotland. The oil reserves in the North Sea are estimated to be worth in the region of £1 trillion, and nationalists argue that, if granted independence, Scotland would benefit from more than 90 per cent of the tax revenues from this oil bonanza, allowing the creation of a national oil fund for future investment. Areas such as Ayrshire and Strathclyde could be regenerated, with their economies given a significant boost by independence.
- An independent Scotland could be reindustrialised by its renewable energy sector, with a quarter of Europe’s total tidal energy potential contained within Scotland’s shores, and ten per cent of its total wave energy potential. These under-exploited resources could create new businesses and revitalise rural areas.
- Nationalists cite anecdotal evidence suggesting that newly independent countries experience an increase in overseas investment. Scotland already accounts for 11 per cent of all UK foreign and direct investment, according to accountant EY, and those who seek independence believe foreign investors will look to Scotland in ever greater numbers once the country stands alone.
The arguments against independence
The voices in the Better Together camp are just as loud and insistent that theirs is the best vote for business. The pro-unionist lobby maintains:
- Remaining within the UK increases access to jobs in Scotland and supports exports between the member countries of the union. The anti-independence campaigners insist that even if Scotland were within a free trade area like the EU, trade within national boundaries is easier than across them. The UK Treasury calculates that this borderless trade within the UK benefits Scotland to the tune of £2,000 per household.
- Being part of an entity the size of the United Kingdom brings individuals and businesses greater opportunities. About 450,000 people working in Scotland come from other parts of the UK, and 830,000 Scots work outside of their native land in the other countries of the union. The unionists also highlight that many Scottish firms, particularly those in financial services and pensions, rely on customers who are from the rest of the UK. About one in five of those working in Scotland are also employed by a firm that is English, Welsh or Northern Irish-owned.
- The economies of scale involved in the United Kingdom mean that the Scottish oil industry can benefit from greater tax breaks and decommissioning relief to attract investment into the region. Pro-unionists argue that being part of the UK gives Scottish oil and gas businesses a stronger voice on the international stage.
- Scottish business owners who support the union insist that having a largely coherent regulatory regime between England, Scotland, Wales and Northern Ireland is a distinct advantage when doing business. Others point out the merits of having access to an effective single market of 60 million people across the UK, rather than the five million that Scotland represents on its own.
- Other critics of the break-up suggest that there are too many unknowns and variables in the independence case for Scottish businesses to risk going it alone. Some express uncertainty about which currency an independent Scotland would use, whether it would be part of the European Union, and on what terms.
Each side is ready with its arguments and supporting statistics. The independence lobby point to a survey by insurer Axa saying that more than half of Scottish SMEs want a stand-alone Scotland. Meanwhile, those who want Scotland to remain a part of the UK nod to recent Forum of Private Business research suggesting three-quarters of businesses in Scotland intend to vote to remain part of the UK. Whatever the outcome on September 18th, the near third of a million business owners in Scotland remain more concerned about regulation and taxation, transport, and national resources – and, of course, funding. With the Public Accounts Committee publishing a recent report that points out the failure of schemes to help lending to smaller firms, SMEs have more practical things on their mind than national fervour and ideology. Many will wish for the quarrel to be decided one way or the other so that they can get on with running their enterprises. As Burns himself said:
“Suspense is worse than disappointment.”
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