News Column

Would a vote for Scottish independence lead to an exodus of finance businesses?

May 1, 2014

YES Douglas McWilliams If I had the right to vote on Scottish independence, economics would rank down the list in deciding how to vote. But I suspect the initial economic consequences would be negative. I don't accept that an independent Scotland would have a fiscal problem. But I do think it will be hard to prevent a sharp contraction of Scottish financial services in the event of a Yes vote. The experience of the euro means there will be no economic or banking union. The bulk of the customers of the Scottish financial services sector are based in the rest of the UK. Post-independence, this means that many financial businesses north of the border (especially banks) will want to move activities to England for regulatory reasons. Obviously the scale of this is uncertain, but our rough estimate is that it means 20,000 to 40,000 jobs going south. Douglas McWilliams is executive chairman of the Centre for Economic and Business Research. This is a shortened version of his Gresham professorial lecture given last night, available at

NO Richard Holt To be competitive, financial firms need low borrowing costs, good credit ratings, and low currency and political risks. They also need to reassure retail customers that they are protected by sensible prudential regulation. An independent Scotland would struggle to create a credible regulator overnight, and its government could not guarantee all the liabilities of Scotland's banks and other financial institutions. And, either in or out of sterling, there might be problems with borrowing costs and credit ratings. So Scottish firms may relocate their legal places of residence. The issue is how many jobs would move. A brass plate in Throgmorton Street would satisfy nobody, but that doesn't mean entire workforces would move. Standard Life's chairman spoke of "transferring parts of our operations from Scotland," not quitting it entirely. Further, relocating huge numbers of jobs to London would be extremely expensive, and other UK cities are too small to absorb a complete exodus. Richard Holt is regional economist at Capital Economics.

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Source: City A.M. (UK)

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