Scottish Independence: How quickly will UK businesses experience a negative effect?
If Scotland votes Yes at the polling booths, assembled entrepreneurs, business leaders and experts predict how it might affect businesses negatively
Most of the stakeholders Startups spoke to argued the negative effects of Scottish independence on business could last years – and some opined a Yes vote could end their operations in the country altogether.
Scottish entrepreneur and financier Callum Campbell is the founder of crowdfunding platform Fireflock.com. He told Startups that a break from the UK would have catastrophic implications for start-ups: “As chairman of a steering group for Scottish enterprise, and a proud Scot, I want nothing more than a vibrant Scotland full of exciting, young, high-growth companies.
“The fact is though, if Independence is voted through tomorrow, regulation will make it very difficult for financiers based in London or elsewhere in the UK to raise funds for young Scottish companies. This will starve these young companies of the capital investment they urgently need to growth and thrive.”
Scottish entrepreneur Steven Renwick, CEO of credit control agency Satago, added that there is likely to be a knock-on effect of lack of capital: “Longer-term Scottish companies may have more difficulty getting access to investment, which will prevent them investing in growing their businesses.”
UK-wide provision of services
Jamie Ward, founder and CEO of pay-as-you-go gym pass provider PayasUGym.com, said Scottish independence could spell the end of the company’s operations in the country. Ward explained: “Our business operates across the whole of the UK with a small but very important part of our customer base in Scotland.
“If Scotland voted for independence and this affected the currency and tax (corporation and/or VAT) situation then we would have to analyse the impact of associated re-development of our systems, advisory fees and on-going overheads to continue offering our services there.
“My fear would be that these complications would be too great for us to continue offering our services, which would be a huge shame.”
Adam Taylor, co-founder of pet food delivery service Petshopbowl.co.uk, said his company may have to end their current practice of offering free delivery to customers in Scotland. Taylor explained: “We use national couriers to delivery pet food to the pet parents of Britain. Our main courier has mentioned that cost for deliveries to Scotland will go up.
“Currently we offer free delivery across the whole of the UK. We have a large number of our customers being located in the Scottish Highlands who mention because they are isolated and don’t have access to retail e-commerce and services like PetShopBowl.co.uk has become a vital lifeline.”
Satago’s Renwick added that another danger for UK businesses if they have key suppliers in Scotland is that independence may “put a strain on their own supply chain”.
Imports and exports
Currency expert and founder of online exchange platform Kantox, Phillipe Gelis, believed a Yes vote could have a long-term negative effect on GBP: “Companies in the UK are already feeling the impact of the debate around Scottish Independence, as the pound hit a historic nine-month low this week following the provisional announcement that the Yes vote had crept into the lead.
“Importers in particular will be feeling the pinch as the cost of buying products from suppliers oversees will have increased.
“If Scotland does vote for Independence, the ensuing uncertainty on the markets as Scotland and the UK decide how to proceed (particularly in terms of currency) could keep GBP weak against other currencies.”
Renwick again took a pessimistic view here. “I think businesses in Scotland will have an immediate negative effect with international customers delaying doing businesses with them over a period of a year or two until they understand the full impact of independence,” he explained.
“I don’t think businesses in the rest of the UK would have much negative impact – rather they would benefit as customers may decide to trade with a UK business rather than a Scottish one.
William Berry, founder of debt management company Vincent Bond & Co and a member of the Entrepreneur’s Organisation, which recently signed a letter urging Scots to vote no, was particularly worried about the currency situation. “Having a different currency would be a complete and utter disaster.
“It would add to all the costs of running a business – even if you’re not spending money dealing with it, you’re spending money just worrying and planning for it.
“I know of companies that have completed a deal in a foreign currency, and have had their payment delayed for whatever reason, only for the exchange rate to turn against them. In one instance I know of, they ended up having to close the company.”
Stock market fluctuations
Stephen Attree, managing director of MLP Solicitors, argued a Yes vote could spell long-term pain for Scottish businesses in particular. He explained: “It is important to stress that the business landscape would not change overnight following a yes vote.
“Initially, it is true, there is likely to be considerable uncertainty in the markets as companies and investors take stock of what has happened. As a result, we may see fluctuations in stock market prices for companies based in Scotland or companies with significant operations in the country. This may discourage investment in Scotland in the short term.
“In the medium term, the UK and Scottish governments will have to embark on a period of intense negotiations to disentangle everything from taxation and banking to energy and transport. The Scottish Government hopes that the key points would be ironed out within 18 months. The Better Together campaign, by contrast, argues it could take years. Whatever the truth, the fact is that Scotland would enter a transition phase for at least 18 months. During this period, the country would have to issue a raft of legislation to pave the way for independence.
European Union membership
Attree continued: “Longer term, meanwhile, Scotland may have to reapply to the European Union. This means Scottish businesses may temporarily miss out on the benefits of free trade that they currently enjoy with their counterparts from other member states. Some senior figures in Brussels have suggested this process could take several years.”