Scotland Referendum

What does the result of the recent Scottish referendum for independence mean for businesses?

By Andrew Naylor, Cicero Group


The Scottish referendum was one of the most talked about political events in the UK for many years — it gained significant media coverage across the world, including here in Singapore. Many were amazed that the 307-year union — perhaps one of the most successful and stable in the world (Great Britain’s territorial integrity has endured throughout, and has not been subject to the internal revolutions, civil wars and the emergence of despots that have plagued many countries in the same period)—could come to an abrupt end.


In the run up to polling day, it was becoming clear that whatever the ultimate result, the independence referendum signalled a profound change for how the British Isles are governed. For many months the UK government and UK-wide political parties rested on the assumption that a ‘no’ vote was all but guaranteed. The ‘yes’ campaign had trailed in the polls since the campaign began unofficially two years ago, when David Cameron and Alex Salmond signed the Edinburgh Agreement that paved the way for a referendum on independence. Throughout most of the period, the independence movement was behind by 15–20%.


That changed two weeks before the referendum. Suddenly, the polls narrowed and at one time the ‘yes’ campaign was ahead. There were a few reasons for this. Salmond performed well in the second TV debate, the ‘yes’ campaign was much better run, and many traditional Labour Party voters started switching sides as the SNP played up their left-wing credentials. Suddenly, Westminster—and the rest of the world—was awake to a potential breakup of the United Kingdom.


Businesses—including many in the financial services industry—were worried; not necessarily about independence per se, but about the uncertainty that a vote for independence would bring. There were many unanswered questions, such as an independent Scotland’s monetary system and whether it would retain (or even regain) European Union membership and the unhindered access to the world’s largest single market that EU membership accords. Another big unanswered question was how markets would react in the event of a dissolution of the Union, and whether an independent Scotland could realistically support a financial services industry seven times its GDP.



In the end, the ‘no’ campaign won by a reasonably comfortable margin. What is now clear, though, is that change is still on its way—not just for Scotland, but for the constitutional relationship that underpins the United Kingdom. The people of Scotland may not have voted for full independence, but 45% did and, as Salmond noted, the 55% that voted to remain part of the UK did so on the premise that much more power would be ceded to Scotland.


Implications for business and financial services


Details of the new constitutional arrangement are still being hammered out, but we can expect Scotland to get greater fiscal powers, both to raise taxes (including corporate taxes) and spending. There is also talk of the Scottish Executive being able to borrow more (to a limited extent) through financial markets.

The debate also awakened voters south of the border. Many in England are now calling for a reciprocal relationship, perhaps expressed through a new English Parliament. While the constitutional settlement is still being debated, it looks like the UK is moving towards a more federal system. Much will depend on the Smith Commission, reaction south of the border to Lord Smith of Kelvin’s recommendations, and the result of next year’s General Election. Whatever the result, businesses will need to prepare — for an uneven fiscal regime, for dealing with a greater number of perhaps conflicting institutions in the UK, and for developing a multi-country strategy when dealing with the UK.




A big question now is whether we will see another referendum any time soon. The SNP have conceded that another referendum is unlikely for at least another generation, perhaps even for a lifetime. One of the main factors contributing to support for independence has been North Sea oil. This oil is running out, though; as it does, so too will the main economic rationale for independence. For some, this year’s referendum could perhaps be the last on Scottish independence for a century. So long as the reaction to the ultimate settlement hammered out by the Smith Commission is positive, another referendum on independence is off the table for many, many years to come.


Although the United Kingdom remains intact, businesses—including many in the financial services industry—will have to get used to a United Kingdom of semi-autonomous countries. No-longer will a one-size-fits-all approach to doing business in the UK suffice. Investors will have to develop much more localised business strategies. Many already do so, but those that don’t will have to get used to a new system of governance in the UK and its member-countries.


Facts & Figures


  • Final result: 55.3% No, 44.7% Yes
  • Turnout: 84.59% - one of the highest in the UK
  • Electorate: 4,283, 392
  • Only four out of 32 regions voted in favour of independence
  • Simple yes/no vote on the question: "Should Scotland be an independent country?"