The SNP argues that an independent Scotland would be one of the world’s richest countries. Unionists insist that Scotland would be financially incapable of going it alone.
This has been the key battleground on which the independence debate has been fought. But independence would have major potential implications for businesses on both sides of the border. So what would Scottish independence mean for the UK’s businesses and economy – and, potentially, those of a post-Union Scotland?
Currency and economy
Currency and economy are two of the most crucial aspects of the independence debate, and they are intrinsically linked.
Alex Salmond and the SNP want an independent Scotland to keep the pound, but the three main Westminster parties have ruled this out. There has been speculation that Scotland might choose to join the Euro, but there is little popular enthusiasm for this in the country, and in any case this would be a very long process.
Just as interestingly, however, is the prospect of an independent Scottish currency. While many commentators believe that it would be difficult for Scotland to encourage sufficient investor confidence in such a currency, this move could have major implications for the rest of the UK, with speculators potentially choosing to dump bonds thanks to the breakup of the Union and newly reduced oil reserves. Importantly, Scotland has indicated that it would refuse to take on UK debt if it was not allowed to keep the pound. This could also have implications for English bond prices, but the chief secretary to the Treasury has also warned that such a move would likely cause problems for the cost of Scottish borrowing too.
There remains great disagreement over the strength of an independent Scottish economy. Much hinges on assessments of the North Sea oil reserves. The SNP insists that there is around 24 billion barrels’ worth of oil left untapped, with 42 billion having been produced since 1964. It says that by setting aside some of its tax take from those reserves it could build up a sovereign fund similar to that seen in Norway. Others claim that the SNP has exaggerated the total amount of oil left.
But just as important is Scotland’s choice of what to do with the money they do have. An independent Scotland would be able to set its own tax rates, and would keep its own VAT receipts. Pro-independence groups also argue that independence could help rebalance what they see as an unfair Westminster focus on the south-east of England, allowing it to divert its money towards Scottish taxpayers and businesses instead.
Scottish independence would also have major political implications south of the border. Much of the reason that the Labour Party has been so vocal about its support for the Union can be found in the fact that it would suffer heavy electoral losses as a result of independence, losing around 40 MPs. Scotland has, in the last few decades, been a Labour heartland, and there is widespread agreement that independence would solidify Conservative rule in England.
But it is important to remember that Scottish politics has just as much capacity to swing as English. For all the talk of radical independence, it is far from inconceivable that a future Scottish Parliament could move to the right, potentially changing the political and economic landscape for small businesses across the country.
There is also concern that a Yes vote could begin a ‘domino effect’ that could ultimately see the UK break up even further. There is particular speculation about the north of England. This area has close ties to Scotland – not just geographically but also in terms of trade and culture. In the event of long-term Conservative government, which many argue has unfairly favoured London and the south-east, some commentators believe that the north of England could grow increasingly unhappy. Alternatively, there is speculation that the north of England’s potential ‘border town’ character could persuade Westminster to divert more resources their way.
Clearly, though, Scottish independence would boost calls for self-determination amongst other nationalist groups. It is not inconceivable to see calls for at least further devolution from, for example, Wales and the north-east.
What if there’s a No vote?
Of course, Scottish independence is not a foregone conclusion. The average poll gap is now virtually nil and, while many people have already cast their ballot by postal vote, much will depend on voter turnout on the day.
However, even in the event of a No vote, things are unlikely to be the same for the Union. In a last-ditch attempt to swing the vote, the Yes campaign pledged to offer new devolved powers to Scotland, with details to be published in November. They have not explained, however, exactly what those powers might be, although it is presumed that the Scottish Parliament would have further tax-setting powers and, perhaps, a share of VAT receipts originating in Scotland.
Perhaps more importantly, though, a close vote in favour of No would likely lead to a series of continuing referenda until a Yes vote is reached. The No vote is propped up by older people, while younger voters tend to be in favour of Yes. The No campaign had hoped that a No vote would take independence off the agenda for a generation, but the extraordinary performance and momentum of the Yes campaign has meant that this is no longer looks likely.
What do I need to do now?
There has been a huge range of scare stories directed at small businesses regarding Scottish independence. The important thing to remember is that things are not going to change overnight. Scotland will not immediately become an independent country in the event of a Yes vote - there will be a protracted period of negotiation in which the uncertainties are ironed out. Some commentators are advising Scottish businesses to transfer their accounts payable to Scottish bank accounts. Others are suggesting that businesses with clients on the other side of the border should get in contact with them to check that they will still be comfortable doing business in the event of independence. While every business should consider these options, it is vital that everyone concerned remembers that a Yes vote would simply be the first step on a long route to independence, during which politicians on both sides will be keen to protect small businesses on both sides of the border.