GROWING uncertainty over the impact of independence on Scotland’s banking and insurance giants could see them relocate to England or suffer credit downgrades, new reports have warned.
Finance industry chiefs in Scotland say the latest interventions from Standard and Poor’s and Citigate add to the “overwhelming” warnings of higher costs and complexity after a Yes vote.
It came as Douglas Flint, the chairman of HSBC, the UK’s biggest bank which employs 3,000 people in Scotland, said: “At the extreme, uncertainty over the Scotland’s currency arrangements could prompt capital flight from the country, leaving its financial system in a parlous state.”
Financial services are one of Scotland’s most lucrative industries, employing about 100,000 people directly and are worth about £7 billion to the Scottish economy.
The impact of tougher “tax, regulation and customer protection” regimes after a Yes vote could push Scottish-based insurance firms to move, the influential credit agency Standard and Poor’s says.
Big insurance firms, including Standard Life and Scottish Widows, could see their credit ratings hit in the event of a Yes vote. It could lead to higher premiums for Scots buying products like life insurance.
The report warns that taxation is a “key driver” of life insurance policy and “would be a significant challenge” for Scotland-based life providers as 70 per cent of their incomes currently come from outside the UK.
Standard Life has already warned that they it is making provisional plans about the prospect of moving parts of its business outside Scotland.
The report by analyst Mark Nicholson warns that under independence – or even greater devolution – the tax and regulatory regimes could diverge from the UK. This would add “further complexities and costs for insurers”.
“We therefore believe Scottish independence has the potential to drive negative rating actions on insurers operating in Scotland.”
A separate Citigroup report warned Scotland’s banking sector was under threat in the event of a Yes vote, whether the institutions remain in Scotland or not.
The Scottish Government’s plans over currency in an independent Scotland was also criticised by Citigroup, which said that the lack of clarity was “astonishing”.
But Gordon MacIntyre-Kemp, chief executive of Business for Scotland, blamed the UK government for the growing lack of clarity. However. Better Together said it showed Alex Salmond was running out of time to name Plan B.