What would Scottish independence mean for your business?

The road to Scottish independence suddenly looks rather shorter.

The Scottish National Party has chosen their preferred wording for the referendum – and it is thought that the question will be put to the population in the autumn of 2014.

Does this mean the end of the United Kingdom?

Scottish independence would mean the end of the United Kingdom as it currently exists. Many political commentators have also suggested that calls for Welsh independence could grow if the Scots were to leave. While an independent Wales is more difficult to imagine, it is clear that any form of union would become rather more precarious.

Some constitutional experts also believe that the effects would not be as simple as the creation of a new independent Scottish state. Rather, they say that in effect two new countries would be created: an independent Scotland, and a ‘new’ United Kingdom – with all the legal and economic difficulties that this would entail.

How will this affect my business?

Scottish independence would have significant implications for businesses, both in Scotland and the rest of the UK. Some of the most important concerns include:

  • Currency. This is one of the most contentious points in the independence debate. Will Scotland keep sterling? Conservative politicians have suggested that the UK would not ‘allow’ Scotland to use the pound – but this is either showboating or economic illiteracy. As First Minister Alex Salmond has said, the UK has no power to prevent Scotland using what is already a fully tradable currency. Salmond has made clear that he hopes Scotland would keep the pound, through the establishment of a formal or informal ‘sterling area’.

If for some reason Scotland was forced to switch to its own currency, it is thought that it would devalue against sterling. This would mean that Scottish products would be cheaper to those purchasing in sterling.

  • EU membership. Negotiations over membership of existing blocs like the EU (or indeed NATO, which Salmond wants to leave) could cause significant problems. There is a suggestion that Scotland could have to start the EU entry process from scratch – and that process could be very lengthy. An exit from the EU, however, temporary, would obviously have major implications for Scottish businesses. But it could also cause problems for firms in the remainder of the UK that wish to continue doing business with Scottish firms – particularly if Westminster and Holyrood failed to negotiate a mutually acceptable trade agreement.

It is also worth noting that some commentators believe the remainder of the UK would have to renegotiate its membership of these blocs, if it is determined that two new states are being created. In practice, though, it seems difficult to imagine a situation in which the UK would be forced to begin EU membership negotiations again.

  • Import and export. The rest of the UK would remain Scotland’s largest trading partner by far – despite George Osborne’s vague and much-derided threats about Scotch whisky. This is amongst the most significant reasons why the coalition government will be forced to abandon its idea of a separate currency for Scotland. Practically, both governments will almost certainly do what they can to make trading as easy as possible between Scotland and the rest of the UK.

  • Work permits and immigration. It is not currently thought that there will be any border controls between Scotland and the rest of the UK.

Scottish independence is still some years away, and the negotiations will likely continue for some time after a referendum. But businesses on both sides of the border need to start thinking about the potential implications of a ‘yes’ vote.

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