Two thirds of UK finance professionals believe Scottish independence makes no financial or economic

Just one in ten (11%) finance professionals support the financial and economic arguments for Scottish independence, with 22% remaining on the fence
 

Scotland sees 23% increase in financial services roles since 2007 – with 9,000 new jobs in the past year
 

Sector set to weaken if Scotland becomes independent, with leading finance firms considering relocating elsewhere in the UK

The majority of UK finance professionals disagree with the economic and financial arguments for Scottish independence, according to specialist accountancy and finance recruiter Marks Sattin*.

The research found that over two thirds (68%) of finance professionals practising across the UK believe that Scottish independence makes no economic or financial sense.

By comparison, only one in ten (11%) agree with the financial arguments put forward for Scottish independence and a fifth (22%) remain undecided on the issue.

Economic and fiscal forecasts for Scotland

The consensus among UK finance professionals appears to be supported by recent reports from the Office for Budgetary Responsibility (OBR) and the Scottish Government – which downgraded their original forecasts for North Sea oil revenues¹.

In 2012-13, Scotland ran an underlying fiscal deficit of 8.3% of GDP compared with 7.3% for the whole of the UK, even after factoring in a geographical allocation of North Sea oil revenues.

The Confederation of British Industry (CBI) predicts that under the OBR’s revised oil revenue forecast, by 2016-17 – the first year of proposed independence – Scotland’s fiscal deficit will widen to 2.4% higher than the UK’s.

The UK’s main political parties have also ruled out continuing a currency union should Scotland become independent. Without the relative stability of the pound, it is expected that uncertainty for Scottish exporters and importers would heighten. Similarly many expect the creation of a new trade border would increase costs for businesses that currently benefit from a common set of rules.

Scotland’s financial services sector

There are an estimated 165,000 people employed in financial services in Scotland, equating to 7.6% of Scotland’s total workforce and contributing 12% towards its Gross Value Added (GVA)²  – the economic value of goods and services produced. Such a contribution to the regional economy by financial and professional services is larger in Scotland than in any other area outside London.

Marks Sattin’s research also found the number of financial services jobs in Scotland has grown by nearly a quarter (23%) since 2007. This averages out at a growth rate of 6% per year. By comparison financial services jobs in the UK have increased by only a fifth (20%) over the same period.

Should the outcome of the Scottish referendum be a “Yes” vote there may be significant ramifications for the region’s financial sector, with a number of leading firms considering relocating their headquarters elsewhere in the UK.

Conversely, a recent Government Scottish Affairs select committee concluded that were financial companies to stay in an independent Scotland it would result in an “exceptionally large” financial industry, which could threaten financial stability³.

Dave Way, Managing Director of Marks Sattin said,

“Our research suggests the overwhelming consensus among UK finance professionals is that the numbers simply don’t stack up in favour of Scottish independence. With the debate hotting up as campaigns turn the final corner towards September’s referendum, it may well be the fiscal fight that clinches public opinion.

“Scotland’s financial services sector has clearly thrived in recent years, increasing by a quarter since 2007. While the tangible impact of an independent Scotand remains to be seen, there are clearly question marks shrouding the potential impact on financial services and the prospects for continued growth.

“On the other hand a ‘yes’ vote will inevitably usher in radical changes in terms of currency, interest and exchange rates and wider business finance. The challenge of setting out Scotland’s stall as an independent nation would call for significant fiscal and monetary expertise, not to mention fundamental leadership and change management skills.”

Data Sources

*Based on a poll of 354 UK finance professionals conducted between 4th and 18th July 2014
**Scotland employment figures from ONS Annual Survey of Hours and Earnings 2013
¹ Government Expenditure & Revenue Scotland 2012-13] http://scotland.gov.uk/Publications/2014/03/7888
² Annual Survey of Hours and Earnings
³ HM Government Scotland Analysis: Financial Services & Banking https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/
200491/scotland_analysis_financial_services_and_banking_200513.pdf