With such profound changes potentially on the horizon it will be surprising to many to learn just how little will be known about the consequences of independence before the actual vote takes place, and indeed for some time afterwards.
Many of the important aspects of how an independent Scotland would function depend on the outcome of negotiations with the UK, the EU and other authorities. These negotiations, on matters such as currency, the terms of EU membership and division of the national debt, can only begin after there has been a ‘yes’ vote.
Moreover, we cannot know now who would be in government in an independent Scottish state as that would depend on elections in that new political entity.
Should there be a ‘yes’ vote, the key issues for financial services would be:
- EU membership. Would membership be offered? If yes, what would the terms be and would the Scottish people support EU membership on any terms? The only certainty in any of this is that these negotiations would not happen overnight.
- Currency. Any introduction of currency uncertainty is unwelcome. All of the options being considered will bring more cost and complexity than the status quo. With a currency union now being effectively ruled out, the options left would be to seek early entry to the eurozone, create a new Scottish currency or use sterling on a ‘dollarised’ basis. None of these options is straightforward.
- Regulation. We know there would be a separate Scottish financial regulator but not how it would be configured. It is an EU requirement and a basic element of state apparatus. This would be additional to the existing regulator, since most clients of the financial services industry in Scotland are in, and would remain in, the rest of the UK.
- UK single market. Scottish-based organisations have for centuries been able to sell products and services into a market about 10 times the size of Scotland without any barriers. An independent Scotland would be a new and separate jurisdiction for taxation and regulatory purposes. Since financial products and services are tailored to tax, consumer protection and regulatory regimes, different products would be needed for the two jurisdictions.
- Transition. A period of uncertainty following a vote for independence is inevitable while negotiations with the EU and the UK Government take place, and new constitutional and currency arrangements are agreed. During this time, business activity and the need to serve customers would continue and standards would have to be met if we are not to lose out to the competition.
The industry in Scotland faces a period of uncertainty where individual companies will need to consider what, if anything, they can do to address the risks and uncertainties inherent to the referendum process and how this will affect their business, customers, employees and owners.
These will not, of course, be the same across the industry; it is a diverse one and companies within the sector will be affected differently depending on how they are configured, where their customers are and the nature of their business. But it goes without saying that if there is a ‘yes’ vote, things will change, and the industry would need to reconfigure to match that change.
