Join our community of smart investors
OPINION

The Scottish play

The Scottish play
March 12, 2014
The Scottish play

Mr van Beurden's position parallels that of Bob Dudley, his counterpart at BP, who cited "big uncertainties" on a call with investors and analysts following last month's annual results. Standard Life (SL) also used the platform of its annual results on 27 February to take a stance, albeit a more subtle one. While declining to give a house view, chairman Gerry Grimstone warned, in indelible writing, that the insurance giant would "take whatever action we consider necessary - including transferring parts of our operations from Scotland - in order to ensure continuity".

Standard Life presented the comments as contingency planning of the kind any responsible management team should be engaged in. Naturally, however, they were interpreted as blackmail by separatists, who flocked to the company's official Facebook page to leave scathing comments and one-star reviews. Mr Grimstone and the executive team must have anticipated this political fall-out, only to conclude that its benefit to the unionist cause, and thus the company, would outweigh any loss of business.

That calculation underlines the very real problems the poll presents for the Scottish financial services industry. In Standard Life's analysis, the "uncertainties" include which currency an independent Scotland would use; how soon it could negotiate entry into the European Union, the "shape and role of the monetary system"; how financial services would be regulated and consumers protected; and how savings and pensions would be taxed.

Other companies affected by the same questions include RBS and Lloyds (LLOY) - which may be forced to move their official headquarters south to comply with a 1995 EU law - Aberdeen Asset Management (ADN) and, on a smaller scale, Alliance Trust (ATST). "Our savings business is affected by the same issues [as Standard Life]," says Evan Bruce-Gardyne, Alliance Trust's director of investor relations. He points out that the questions will remain unanswered long after the poll on 18 September, if Scotland votes to leave. "The referendum will be the starting gun, not the finishing post. That's when the real work will start."

Standard Life's threat to decamp is leant some credibility by the historic parallel with Quebec, which held referenda to quit Canada in 1980 and again in 1995. The second time, the separatists lost by an unexpectedly narrow margin, with just 50.6 per cent of residents voting to stay within Canada. Many blame the shockwaves this sent through the Canadian establishment for the decline of corporate Montreal. In 1990, the Quebecois capital was home to 96 of Canada's top 500 companies - 19 per cent. By 2011, the number had fallen to 75, or 15 per cent, according to research by the Fraser Institute, a neo-liberal think-tank.

Constitutional uncertainty is not the only reason for this decline. The resources boom may have skewed the economy towards Calgary. And higher corporate and personal taxation may have played a part: Vancouver and Calgary, the cities that have gained headquarters over the period, have lower taxes. But the constant threat of a break-up - with the attendant questions about currency, debt, credit ratings and interest rates - can hardly have helped. The situation is ongoing. Yet another referendum is likely if the Parti Quebecois attracts enough votes in next month's election to form a majority government.

But Shell's Mr van Beurden drew a different parallel last week. The headlines focused on the Scottish question, but the boss's bigger point was that he wanted Britain to remain "at the heart of the European Union", also because it "provides greater investment stability and certainty".

The referendum on Britain's EU membership, which the Tory party has promised its supporters for 2017, is different in key respects from the mooted secession of Scotland or Quebec. Britain already has its own currency, debt and interest rates, so many of the uncertainties enumerated by Standard Life for Scotland do not apply. Britain is also a much bigger market in its own right. But the big picture debate is similar, with emotive arguments for independence squaring off against neo-liberal defences of economic integration. If the Tories win next year's election outright, it may be only a matter of time before US multinationals start echoing Standard Life's warnings about the risks of leaving the Union.