Aggreko Chief Warns on Currency Costs If Scotland Leaves U.K.Rodney Jefferson
Aggreko Plc Chief Executive Officer Rupert Soames warned of the financial cost to companies should Scotland leave the U.K. and lose the pound, while other business leaders said they would cope with any currency.
At a hearing in the Scottish Parliament in Edinburgh today, Soames estimated the expense to Aggreko, the world’s largest supplier of mobile power generators, might be as much as 12 million pounds ($20 million) based on 400 million pounds of production costs should Scotland leave the sterling area. Jim McColl, founder and CEO of engineering group Clyde Blowers, told lawmakers businesses use different currencies all the time.
“Everything we buy will have currency risk and everything we sell will have currency risk,” said Soames, whose company is based in Glasgow. “Could we hedge that? Yes. What might it do to our costs? I can’t tell you precisely but my best guess is 2 to 3 percent of our manufacturing costs. That’s not scientific.”
The pound is at the center of the intensifying argument over Scotland’s future before a referendum on independence on Sept. 18. Scottish nationalist 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. The main political parties in London have ruled that out, and in a speech tomorrow Advocate General for Scotland Jim Wallace will dismiss Scottish National Party claims that an independent nation would have some sort of entitlement to the Bank of England as “fundamentally flawed.”
The latest opinion polls show a gap of between seven and 12 percentage points in favor of keeping Scotland in the U.K. There are enough undecided voters to make the outcome too early to judge, according to the polling companies.
Soames and McColl were on panels of executives responding to questions from lawmakers on the Scottish Parliament’s economy committee, which a week ago heard Chief Secretary to the Treasury Danny Alexander reiterate the government’s stance on the pound and warn that Scotland would face higher borrowing costs if it breaks away.
Entrepreneur Robert Kilgour, who said he had written a “small check” to the pro-U.K. Better Together campaign, told lawmakers today the cost of finance was among the greatest concerns should Scotland leave.
He and Apex Hotels Chairman Norman Springford said financing was tougher to find because of uncertainty over the outcome of the referendum. Kilgour said he knew of investors who had postponed committing money because of the vote. Springford said his company was looking at more investment in England.
In the committee session with McColl, Scottish real estate developer Dan MacDonald said that was more a reflection of the U.K. economy and independence was being used as an excuse.
“It’s hard to raise money for any project so it’s just easier to delay,” he said.