It doesn’t matter how we vote, as long as our clients and the wider world know we are still in fine working order, says Kirk Murdoch
This week the country will take to the ballot box to decide on whether Scotland is better as part of the UK or as a separate country.
It is a truly historic occasion, and comes in the wake of a remarkable period in which Scotland has become the focus of international attention. Whichever way the vote goes, businesses operating in Scotland are going to have to adapt as change is inevitable.
We have already seen that happening to a certain extent, with several major employers in Scotland – including RBS, Lloyds Banking Group and Standard Life – giving an indication of their contingency plans in the aftermath of a Yes vote.
Other businesses, which are either not so heavily regulated or less systemically important to the Scottish economy, may be less far forward in their planning.
They need not panic. There will be sufficient time between the outcome of the vote and a settled position being reached to make appropriate arrangements. Indeed, at the risk of sounding terribly lawyerly, the devil is always in the detail – plainly there is only so much planning that can be done without it.
But what are the big picture themes for Scottish businesses?
If it’s a Yes, it would mean substantial change. The most obvious and pressing subjects would be tax, currency, European Union membership, legal entity structures and regulation. A whole new tax structure would be needed.
If we don’t use sterling, contracts and agreements may have to be renegotiated and much work would be needed on establishing separate payment structures. Throw in potential change to how we treat assets, property, employment law and labour relations - and of course the big issue of pensions - and it’s easy to see there would be a huge requirement for businesses to understand the differences and what they must do to comply.
In the event of a No vote, we may experience a lack of clarity as to what exactly comes next. At the time of writing, the main political parties have set out their proposals for change and a timetable. It is envisaged that work on a “new deal” would begin on 19 September and culminate in the publication of a draft Scotland Bill by 25 January. This would be adopted by a Westminster government of any political colour after the general election.
This bill could include the transfer of personal taxation and other taxes to the Scottish Parliament, along with welfare payments. However, the detail of the bill and the extent of powers devolved will be decided by the party or parties that form the next UK government in May 2015.
The devolution of taxation powers to Scotland would surely require a review of the current UK Government funding model for Scotland which would also affect UK government funding for Wales and Northern Ireland. This might see changes in the UK funding to the devolved administrations to offset the transfer of tax-raising and other revenue raising powers such as capital borrowing. All of this may come against the backdrop of an “in or out” referendum on UK membership of the EU – and sit alongside what is already planned as part of the Scotland Act 2012.
This introduces new property and landfill taxes in Scotland from April 2015 and from 2016 there will be a separate Scottish income tax rate. This not only has implications for the likes of payroll systems, but for financial products which have tax relief features, so employers will have to prepare for those changes regardless of the referendum result.
With so many variables, it’s understandable that businesses are perhaps unwilling or unable to contemplate detailed planning just yet. However, whatever the nature of the change, I have two messages for Scottish business.
First, change – whether delivered by Holyrood or Westminster – will bring opportunity. One of the great pleasures of my role is that I often speak to a wide range of business leaders throughout the country, and I know that the entrepreneurial instincts that make Scotland a great place to do business are alive and well here. For those leaders, staying abreast of developments and evolving quickly to the new rules of the game will be key to remaining competitive.
Second, any prolonged period of uncertainty or hiatus in investment would damage the economy and the prospects of the citizens of Scotland – whether as part of the UK or not – at a time when the recovery is still taking hold. The message must go out with one voice, from all of us in the Scottish business community: Scotland remains open for business.
I urge everybody in the commercial world, no matter which way they vote this week, to make that their mantra for the days and weeks ahead.
• Kirk Murdoch is chairman (Scotland and Northern Ireland) of international law firm Pinsent Masons