Some business people are afraid to speak out over independence, but that silence will not last, writes Bill Jamieson
WHEN Rupert Soames, chief executive of Aggreko, one of Scotland’s largest companies, asserted this week that Scottish business figures were unwilling to speak out against independence for fear of the SNP pouring “rains of bile and ire” on them, he was right on the money. He has done the independence debate a huge favour by speaking out as he has. Many in the business world will be reluctant to follow through for exactly the reasons that Soames has bluntly set out. They will prefer to stay silent – for now.
This is not just about whether “business” is for or against independence – important though the business view is on the issue.
The real and greater danger is that many of the fair and legitimate questions that need to be addressed about independence and its consequences are being choked back because business people are fearful that even raising them publicly for discussion would be seen as hostile or partisan.
Over the past several months I have attended many meetings and seminars with businesses large and small over the problems they are facing in the most difficult trading environment for a generation. It is not long before the independence issue comes up for discussion. As many of these meetings were private or held on a “Chatham House” basis, I am constrained from mentioning the names of the individuals and their companies. But four themes were common to almost all of these discussions. I will summarise them thus:
The first was a broad neutrality or support for independence. This view is very much in the minority. A variant of this is that such have been the major concessions made – on staying with sterling and the Bank of England – the result will be “Devo Max” in all but name, so why go through the constitutional trauma of “independence”?
The second was reluctance, particularly among organisations with a large consumer base, to state a position that might offend customers. Such businesses are necessarily circumspect in their public utterances.
The third response was exactly as Rupert Soames has described: a genuine reluctance of business people to put their heads above the parapet for fear of having them shot off by the independence attack dogs – not necessarily of the formal SNP machinery but the wider group of supporters. Two specific concerns are the virulent vocabulary of denunciation and the potential loss of government business if companies were seen to be “off message”. This perception of loss may be misguided, but the fears are real.
The fourth was a widespread – and growing – apprehension over the lack of information on the arrangements for, and consequences of, independence.
Many will now await the Scottish Government’s white paper late next year for the answers to the questions they wish to put. Until then, why go into the ring for shadow boxing, particularly if the punches turn out to be real?
However, from a business perspective, this more measured response carries risks. For every question “answered” in the white paper, there is the likelihood of five more popping up. The long waiting time for information adds to a climate of uncertainty that can only encourage delay or deferment of decisions on investment and expansion. And it truncates the period for discussion of the hard practicalities and outcomes down to less than a year – and this in a highly charged political atmosphere. Good for business in Scotland? I think not.
So what are the questions that most worry business? Where to start is the problem. They range over business law, regulation, employment, banking, taxation, pension arrangements, public spending and debt.
For an economy in which some 40 per cent of total output goes to the rest of the UK, and for some industries such as insurance, where 94 per cent of policies are sold to customers outwith Scotland, ease of compatibility between different jurisdictions is absolutely critical. Would an independent Scottish Government repeal the existing body of UK business law and replace it with new Scottish laws?
Assuming the Scottish Government has the competence, would it have the capacity to create a new body of business law within an acceptable time frame? Or would it accept the existing body of business law as it stands and continue to accept amendments to business law which may be passed by Westminster?
Will the banks and other financial services institutions in Scotland wish to be subject to two separate financial services regulatory regimes, the supermarkets subject to two separate sets of employment and pensions legislation and the generality of companies subject to two separate sets of health and safety regulations while still trying to operate within a “common market”?
If “Westminster rules” are broadly accepted, how would companies cope with being subject to a legislative and regulatory regime over which they have no influence?
On business finance, a key question will be the extent of Scottish Government influence and control while the big banks are either run and managed in London or largely owned by the UK government. From a legal and regulatory perspective, almost all capital markets activity would be carried out under a foreign jurisdiction (most likely English law) over which the Scottish Government would have limited influence.
One of my recent concerns has been small business formation and financing. Scotland attracts only about 2 per cent of UK venture capital investment. Enterprise investment relief is an essential feature of this type of investment, which is now forced into a position of uncertainty. We know all too little of the prospects for financing high-growth companies in Scotland. Business angels are critical.
A document by the Institute of Chartered Accountants of Scotland cited figures showing that the top 1 per cent of Scots taxpayers contribute just over £2 billion in income tax, more than the total raised by council tax and not far short of the £2.7bn raised in corporation tax. These taxpayers, like our intellectual assets, are mobile. How would an independent Scotland seek to retain these while at the same time maintaining its welfare spending commitments?
Moreover, the ability of an independent Scotland to borrow on economic terms in the international bond markets will depend on rigorous fiscal discipline. What will be the likely framework and sanction system to enforce this?
These are just some of a host of questions that business people in Scotland are fully entitled to ask. And ask them they must, because on these our future success and prosperity as a nation depends.
Beware this silence of the corporate lions. It is unlikely to last.