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Independence May Cost Scottish Defense Contractors, U.K. Says

Scottish defense contractors will have less domestic demand and lose access to export markets in the event of independence, the U.K. government said.

The companies, which employ 12,600 people and have annual sales of more than 1.8 billion pounds ($2.9 billion), would no longer be eligible to compete for orders being placed by the U.K. Ministry of Defence for national-security reasons, the government in London said in response to a report published earlier in 2013 by lawmakers.

“It will be for the Scottish government to make its case that an independent Scotland could sustain an appropriate level of defense and security,” the U.K. government said. “Remaining part of Britain offers certainty for people in Scotland.”

Defense and security, together with currency and welfare, are at the heart of the debate about independence, the flagship policy of Scottish First Minister Alex Salmond, who heads the semi-autonomous government in Edinburgh, and his Scottish National Party. A referendum will be held on Sept. 18 next year.

The SNP is seeking to cut defense spending and remove the U.K.’s Trident nuclear missiles from Scottish soil. Its proposed 2.5 billion-pound budget was 7 percent of the U.K.’s spending compared with Scotland’s 8.4 percent share of the population, the U.K. government said today.

Defense contractors with units in Scotland include Rolls-Royce Holdings Plc, BAE Systems Plc (BA/) and Thales SA.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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