Large companies and industry regulators are becoming increasingly concerned about a range of potential risks to the financial services sector if Scotland becomes independent following the referendum later this year, particularly since the Chancellor has confirmed there would be no currency union with a separate Scotland.
Andrew Bailey, chief executive officer of the Prudential Regulation Authority (PRA) has questioned whether the UK regulator would be able to supervise Scottish institutions following a ‘yes’ vote. He said there would be a divergence between the two countries’ structures which could make it difficult for one authority to supervise both financial sectors at the same time.
Bailey was giving evidence in yesterday’s session of the House of Commons Scottish Affairs Committee which is looking at the risks and impact of separation from the UK on financial services.
In his evidence, Bailey said that the only examples of two countries sharing an oversight body in this way were Greenland and the Faroe Islands, but this was on a far smaller scale.
When asked by the committee if the plans were a ‘pig that would fly’, Bailey said: ‘It is a pig that I can’t observe flying in any other part of the world.’
Meanwhile, Standard Life has become the first large Scottish company to warn it may move part of its operations to England if there is a ‘yes’ vote in September. In its 2013 annual report, released ahead of its AGM later today, the insurer said: ‘Scotland has been a good place from which to run our business and to compete around the world. We very much hope that this can continue. But if anything were to threaten this, we will take whatever action we consider necessary – including transferring parts of our operations from Scotland – in order to ensure continuity and to protect the interests of our stakeholders.’
In the section of the report covering strategic risks, Standard Life identified a number of what it called ‘material issues’ around Scottish independence. These include the currency that an independent Scotland would use; whether agreement and ratification of an independent Scotland’s membership to the European Union would be achieved by the target date (currently 24 March 2016); the shape and role of the monetary system; the arrangements for financial services regulation and consumer protection in an independent Scotland; and the approach to individual taxation.
As a result of these uncertainties, Standard Life said it had started work to establish additional registered companies to operate outside Scotland, into which it could transfer parts of it operations if necessary. The insurer described this as ‘a precautionary measure to ensure continuity of our businesses’ competitive position and to protect the interests of our stakeholders’.
In addition, Scottish pumps and valves supplier the Weir Group, one of Scotland’s largest companies, has announced it has commissioned a study into how a ‘yes’ vote would affect its business.
Weir chief executive Keith Cochrane said: ‘There are some serious questions that need serious answers. It’s a very big decision, which is why we’ve asked a consultancy to look at four main issues – currencies, pensions, trade and taxation. We plan to publish the study in about four weeks.’
