By John R Wright
Well much to the relief of most business and the financial services community the dust has settled on the Scottish Independence Referendum. The vote was a clear ‘No’ that has resulted in the United Kingdom (UK) not being broken up, which would have resulted from a ‘Yes’ vote. This would have been catastrophic for Scottish business and finance.
Sound reason and good commercial sense have prevailed!
Major Scottish banks and financial service firms such as Royal Bank of Scotland (RBS), Clydesdale, Bank of Scotland, Standard Life and many others had indicated that they either would move to England or had prepared contingency plans to do so in the event of a ‘Yes’ vote.
However, there is a continuing concern that “nationalism” may again in the future reappear so new investment will be viewed with caution.
The Fund Management Industry where Scotland is a world leader depends on the production line of skilled professionals, CA’s ; actuaries and the like emerging through Scottish institutions.
In an Independent Scotland where taxes could be higher, these skills would move to England taking the employers with them after some time. The financial services sector overall would have been decimated through Independence.
Of course, the next issue on the horizon is that the UK government pledged an ‘IN/OUT referendum’ on EU membership beginning, 2017, if they are reelected. In my view, popular sentiment is such that any party in power at the time needs to do this. If present sentiment continues the vote almost certainly would be ‘OUT’! This would result in the UK financial services sector being freed up from the constraints of EU bureaucracy and its costly regulation and would be most beneficial. Impact would be felt by the remaining EU banks owing to the competitive landscape having changed. Interesting times ahead!
In addition, the referendum in Scotland and the fact that it was allowed by the UK government, will certainly encourage similar Independence movements in the EU, notably in Catalonia [Spain] and in Belgium.
The consequent uncertainty within the EU, coupled with the general deflationary environment right now will pose significant further challenges to the banking system in the EU.
In summary while the impact of the ‘No’ vote has been positive for the business and banking scene in Scotland, there could ultimately be major benefits for the broader UK banking and financial services sector through the EU Referendum and negatives for banks in the eurozone.
Glasgow-based John R Wright is an academic, veteran banker and a former CEO of Oman International Bank and Gulf Bank, Kuwait. The views expressed are his own.
