BEFORE I begin, I wish to make it clear I did not attend the CBI dinner with the Prime Minister last week.
Mindful of the strictures of the Electoral Commission, I stayed at home with a glass of tap water and a cheese sandwich. Just to be sure, I passed up on the Tunnock’s tea cake.
It is surely right that business events in the approach to the independence referendum should be strictly modest affairs, no matter how prestigious the guest speaker: no big dinners, definitely no alcohol, lights out by 9 o’clock and venues preferably restricted to community halls with monk’s bench seating and lit by spluttering candles. Any fripperies to make such events pleasurable should be repressed.
In such Stygian gloom, how are we to assess the mood of Scottish business? And what might the reaction be in the wake of a No or Yes vote? Last week brought contradictory letters – the first from the No camp signed by more than 130 business leaders, immediately trumped by a Yes letter signed by more than 200. Game, set and match to Business for Scotland?
It is, of course, never that simple, and particularly so in a debate that has become increasingly heated and ill-tempered. This may help explain the marked reluctance of many in business to give any indication at all of how they might vote.
Those running a retail business will have a natural disinclination to indicate their own personal views, not wishing to offend one or other set of customers. Many do not want to risk the wrath of cybernats or uber-unionists after disturbing examples of online vilification. And others may have material contracts or business relationships with the Scottish Government that they do not wish to prejudice
There is thus some credibility to the claims by Gavin Hewitt, former Scotch Whisky Association chairman, that more than 100 Scottish business leaders declined to sign the No letter because they feared “consequences” from the SNP Government. He said around half the executives he approached agreed the business case for independence was not yet made but declined to go public amid worries of a backlash, or that planning applications would be stonewalled by SNP-run local authorities if they spoke out.
So what can we glean from the state of business opinion and the weight of support behind these two letters? A Future of the UK and Scotland Analysis at the University of Edinburgh Business School chaired by Economic and Social Research Council senior fellow Professor Brad MacKay, has just published its final report on evidence from business interviews.
The report covered findings from 75 “semi-structured interviews” on business attitudes to independence, with senior business leaders in medium and large companies across six industry sectors. Looking at the composition of the Scottish economy, about 46 per cent of employment is dependent on large firms (as opposed to 41 per cent or so in England), and large firms are responsible for over 60 per cent of turnover.
Across almost all six sectors, MacKay writes, around 50 per cent felt that independence would not present any new opportunities to their businesses.
Of those able to identify opportunities, they were less specific and tended to relate more to the economics and politics of the debate. Only a small minority could identify an opportunity for business investment and growth.
A majority of business leaders indicated that the potential costs and risks of independence to business outweighed the perceived benefits and opportunities. A significant number of medium and large companies have the majority of their trade in the rUK (typically 90 per cent rUK, and 10 per cent in Scotland), and appear far more affected than companies whose trade is mainly in Scotland, or is diversified globally.
Business attitudes towards Scottish independence are clearly influenced by a combination of where the business is domiciled, customer location, headquarters jurisdiction and ownership structure.
The report also reviews two other surveys of business attitudes towards Scottish independence. In all three studies reviewed, approximately 10 per cent of business leaders indicate they may move business activity out of Scotland in the event of a Yes outcome.
As for the two letters, he says the signatories to the Yes letter are largely from small, pro-independence companies. By contrast the signatories to the No letter “represent the largely politically neutral competitive core of business in Scotland – the very backbone to the Scottish economy”.
And the No signatories may not represent the views of the majority of small businesses, which of course make up the largest stock of businesses, but are far more mixed. It is quite a coup for the pro-independence Business for Scotland to have secured so much air-time to give the impression of a score-draw. But it may not be an accurate reflection of the views of this business sector more generally.
What of the impact of a No and Yes vote on the Scottish economy and on markets? According to Capital Economics in a summary released this weekend, a No result would have limited economic impact and markets, including gilts, sterling and equities have largely discounted this outcome. And it might also result “in a more significant rebound for Scottish equities. There might also be a bit of a boost to Scottish business activity”. However, a Yes “would”, it says, “rattle markets and the Scottish economy. We would expect to see a fairly strong sell-off of Scottish equities and significant capital flight.”
As for the rest of the UK, the economic impact of a Yes vote “is likely to be minor” – though I would add such equanimity might soon be replaced by concerns over the impact of Ukip on Conservative election prospects next year and the prospect of a Labour government.
The more immediate impact of Yes would be if parts of Scotland’s financial services industry decamps to England, “probably accompanied”, says Capital Economics, “by many non-financial businesses.” That would indeed be a bleak outcome. But at least we would not have to worry any more about slap-up CBI dinners. «