Standard Life Plc, the life insurer founded in Scotland in 1825, said it’s preparing to shift business elsewhere should voters opt for independence from the U.K. and risks around the currency and regulation increase.
Chief Executive Officer David Nish said “material issues” that remain uncertain include whether Scotland could keep the pound and retain European Union membership, plus rules on financial services and customer protection, and the tax regime. Scotland holds a referendum on independence on Sept. 18.
“We have started work to establish additional registered companies to operate outside Scotland, into which we could transfer parts of our operations if it was necessary to do so,” Nish said in a statement today in the Edinburgh-based company’s annual report. “This is a precautionary measure.”
The argument over Scotland’s constitutional future moved to the forefront of U.K. politics this month as the British government said that Scotland would be denied a currency union and faces higher borrowing costs should it go it alone. Standard Life’s contribution underscores the growing awareness among executives of the ramifications of a “yes” vote.
Standard & Poor’s said today Scotland would be “hard pressed” under a new currency to retain the “deep capital markets” it gets as part of the U.K., though the strength of its economy means “there is no fundamental reason why Scotland could not successfully float a currency.”
The rating company also said Scotland’s large financial industry would be a risk to the new state and some of the activity could be re-domiciled in the rest of the U.K.
Royal Bank of Scotland Group Plc Chairman Philip Hampton said in an earnings report today that RBS was politically neutral and would “respond to whatever voters decide and governments agree.”
RBS, which was awarded the biggest bank bailout in history in 2008, pointed out that a vote for independence “would be likely to significantly impact the group’s credit ratings and could also impact the fiscal, monetary, legal and regulatory landscape to which the group is subject.”
Standard Life is headquartered in Edinburgh and is among the city’s biggest employers along with RBS. RBS Chief Executive Officer Ross McEwan said that companies have to prepare for change whether it happens or not.
“Businesses have to think about the contingency of the ‘what ifs,’ not just to do with Scottish independence but many issues,” he told BBC Radio’s “Today” show. “We’ll have to do our contingency planning and look at the risks of these things, but there’s a lot of time to go until we know the rules of engagement and I’d rather work on a fact-based situation.”
The comments from RBS and Standard Life underscored the risks of independence, Chief Secretary to the Treasury Danny Alexander said.
“It’s common sense that when you have something that works there will be adverse consequences if you rip it apart,” he said in a statement. “The strength and stability of the United Kingdom is the essential underpinning of Scotland’s successful financial services sector over several centuries. These businesses are reasonably and fairly setting out the consequences of the SNP’s dangerous, risky, and unclear plans for independence. I doubt they’ll be the last.”
The latest opinion polls show those in favor of keeping Scotland a part of the U.K. with a lead of between seven and 12 percentage points. There are enough undecided voters to make the outcome too early to judge, according to the polling companies.
Scottish National Party leader Alex Salmond has said Europe’s newest state would keep the pound as part of a currency union with the rest of the U.K. His chosen date for an independence settlement is March 24, 2016. The main political parties in London have ruled out such an arrangement with the pound.
“Standard Life wants to see agreements on currency, regulation and taxation, which is exactly what the Scottish government has proposed,” said Blair Jenkins, CEO of the Yes Scotland campaign for independence. “Standard Life wants a formal currency union and so do we.”
Aggreko Plc CEO Rupert Soames said yesterday that it might cost the world’s largest supplier of mobile power generators as much as an extra 3 percent on its 400 million pounds ($665 million) of production expenses should Scotland leave the sterling area. He was responding to questions at a hearing in the semi-autonomous Scottish Parliament in Edinburgh.
Jim McColl, founder and CEO of engineering group Clyde Blowers, told the panel that businesses use different currencies all the time and it was of no concern to him.
Scotland “has been a good place from which to run our business and to compete around the world,” Standard Life Chairman Gerry Grimstone said in the company’s earnings statement today. “We very much hope that this can continue.”
The insurer reported a 13 percent decline in full year operating pretax profit to 751 million pounds. RBS chief McEwan was speaking after his bank posted the biggest full-year loss since its bailout by U.K. taxpayers in 2008.