Peter Jones: On balance, business will vote No

Companies such as Standard Life do not want to deal with the extra costs of independence. Picture: Neil Hanna

WHEN the word “business” gets tossed about in the independence debate, it is badly misused. If business is said to be pro- or anti-independence, the implication is that all businesses will prosper or suffer from a Yes vote.

Nothing could be further from the truth. Some will do well from independence and some will not. The question really is: where does the balance lie?

Quite apart from the fact that businesses in Scotland do very different things – ranging from farming and fishing to hi-tech manufacturing and care of old people, they vary enormously in size – from no employees to thousands of workers, and in the scope of their activities – from a radius of a few miles to having customers right round the globe.

The interests that each individual business has to weigh up when trying to work out if independence will be a good thing or not are as varied as every individual’s shopping basket at a supermarket check-out.

There may be broad similarities, say in quantities of meat and vegetables, but within those categories there will be a lot of variations – different types of meat and veg, organic or not, processed or not, locally-produced or not, cheap or not, etc.

In terms of business interests, some broad similarities can be drawn. According to the Scottish Government’s corporate sector statistics, in 2013 there were 343,105 enterprises in Scotland. Of these, 242,325 or 70 per cent, had no employees and, therefore, can be classed as sole traders.

A lot of these sole traders are not registered as businesses. Many are not registered for VAT. They will also be paying income tax rather than corporation tax. So in terms of most people’s mental definition of what a business looks like – having employees, paying VAT and business taxes – these 70 per cent of enterprises don’t really qualify. Many would classify themselves as self-employed and not as businesspeople.

But some will regard themselves as running a business. And for them, as with businessfolk employing a handful of people, the kind of things that will concern them in the referendum will be completely different to the issues that worry big businesses.

Micro and small businesses won’t be worried about any potential barriers to trade with the rest of the UK that might be caused by independence because they don’t have any such trade and never will. They won’t be concerned about having to deal with two regulators instead of one because they will always have one set of regulations, perhaps just Scottish instead of UK regulations.

Many of such people might be quite attracted to independence. It, says the SNP, offers the possibility of simplified taxes and regulations. The party can point to a track record of reducing business rates for the small businesses that have premises. So amongst those 242,325 zero-employee enterprises, and among those with a few employees, there may well be quite substantial backing for independence.

If these business believers in Yes were to get the boost they expect from independence, does that mean that Scottish employment and the economy would also be boosted? Not necessarily.

To see why, we need to look at another set of figures on Scotland’s business landscape – the Scottish Government’s annual business statistics. These are compiled on a different basis. They exclude most but not all unregistered businesses, for example, some that don’t have employees or pay VAT, but qualify because they have other business characteristics such as being a partnership.

The latest available figures are for 2011. Because of the exclusions, they show a smaller number of 163,614 businesses in Scotland. The statistics provide some interesting breakdowns.

Of the total, 143,511 were classified as Scottish-owned, 7,318 as foreign-owned, and 12,785 as owned in the rest of the UK. So independence would mean the percentage of foreign-owned firms operating in Scotland more than doubling from 4.5 per cent to 12 per cent.

These companies are certainly concerned about the potential headaches of having two sets of tax and regulatory regimes to deal with, the possibility of having two currencies where previously there was one, cross-border trade difficulties, and so on.

So what, you may say, they are still a minority. Well, that 12 per cent accounts for 596,000, or 35 per cent of 1.7 million private sector jobs. They also account for £143 billion, or 56 per cent of private company turnover. And, say the statistics, they also produce £55.7 billion, or 58 per cent, of the gross value added by the private sector.

To put that in another context, independence will mean that about a quarter of all Scottish jobs and about a third of Scottish GDP (including North Sea GDP) will be in foreign hands. That raises a whole different debate – would this be a good or a bad thing?

But leaving that to one side, it means that a relatively small number of businesses which control an awful lot of Scottish jobs and wealth-creation have legitimate concerns about independence.

To them, it doesn’t matter that Scotland might have a simpler and better tax and regulation regime, the extra cost of dealing with two different regimes is a bigger headache.

Remember also that these figures don’t include the Scottish-owned or registered companies that trade southwards – Standard Life, Royal Bankof Scotland, Stagecoach, SSE, Alliance Trust, FirstGroup, Aggreko and many others. Add them in, and you are probably looking at firms covering half of Scottish employment and more than half of Scottish GDP that reckon independence is potentially bad for their business.

These companies have yet to hear how independence will make their business life simpler and more profitable. They have not heard how independence will open up new markets for them, rather they can see more difficult trading conditions across the existing, and probably most important, UK market.

Paying less tax? They are quite capable of looking at the latest government balance sheets and seeing that Scotland’s fiscal balance has worsened in the past year and doesn’t look like getting better than the UK’s any time soon. That, to them, spells more tax.

Where the balance lies is pretty clear. If you polled all Scottish enterprises on a one-business, one-vote basis on the referendum question, you would probably get a vote not unlike that being found by current voter opinion polls. But if you weighted that vote by employment and turnover numbers, you would get a resounding No.