No one will go to the ballot box to express concerns about investment fund custodianship


The CBI muffed its lines on Scottish independence last week. The employers’ group attempted to register as a referendum campaign participant with the Electoral Commission only to change its mind when faced with member resignations.

There are some businesses – notably those that depend on UK defence contracts, such as Babcock, owners of the Rosyth dockyard – which would be seriously and adversely affected if Scotland votes Yes to independence in September. But wider business opposition seems to be based on vague expressions of unease with little specific content.

Weir Group, a global provider of mining and oil exploration kit and one of the Scotland’s most successful companies, commissioned a report on the implications of independence . The report provides a sensible and balanced though unsympathetic discussion. The conclusion a fair-minded reader would draw is that for a company such as Weir there are not many business implications. It operates in more than 70 countries and would continue to do so. Weir imports components into, manufactures in and exports from Scotland, and on the reasonable assumption that an independent Scotland became an EU member, Weir would continue to do these things much as it does now.

There is concern about borrowing costs. But while a Scottish government would expect to pay more for its borrowing than the UK government, it is difficult to see why this premium should apply to Scotland-based companies. Multinationals with headquarters in small countries, such as Nestlé, Novo Nordisk and Philips, borrow in multiple currencies at rates which reflect their own financial strength, rather than that of the country from which they come. The same is true of corporate borrowers in states with mismanaged finances – Inditex, Fiat or Jefferson Smurfit, for example.

When the financial companies Alliance Trust and Standard Life say they are making contingency plans to shift the focus of their operations to England, it is hard to determine the basis of their fear. Financial centres such as Luxembourg, Hong Kong, Singapore and Dubai trade in whatever currencies their customers demand. Those who claimed that London would lose its role as Europe’s financial centre if Britain stayed out of the euro could not have been more wrong. An investment trust based in Scotland would continue to hold assets around the world and have its shares listed in London. Standard Life would issue contracts in sterling to policyholders – perhaps, but not necessarily, through an English subsidiary.

A Scottish government might blight its financial sector with foolish regulation, but there is no suggestion it would, and it would have strong incentives not to do so. The main source of foolish regulation is the EU, whose alternative investment fund managers directive has been costly to Alliance Trust and whose solvency II directive is costly to Standard Life.

The Weir report expresses concern about limitations on group relief with separate corporation tax administrations. It worries about the implications of an EU directive that treats cross-border private pension schemes differently from those that run in a single member state.

But these arcane issues are beside the point. People cast votes on major issues by reference to overarching narratives about autonomy, identity and prosperity – a truth the wilting No campaign seems not to have grasped. No one will go to the ballot box in September to express concerns about investment fund custodianship, pension fund actuarial deficits or corporation tax group relief. There are important implications for business in Scotland in the independence debate, but they are not these.

It is possible to describe an independent Scotland which would build a better business sector, less focused on London and made more vibrant by the energy and self- confidence which devolution has already brought to Edinburgh. It is also possible to describe an independent Scotland cursed by the entitlement-based culture into which municipal socialism in the west of the country often degenerated, destructively mixed with the crony capitalism and overweening ambition which almost destroyed its financial sector. If Scots are to cast their votes on economic issues at all, these competing visions of their country’s future should govern their choice.

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