Scottish voters going to the polls on Thursday have to consider a bewildering array of factors in deciding whether they want to live in an independent Scotland. The referendum on the fate of the United Kingdom has been framed primarily in economic, not nationalistic terms.
“Yes” backers, including the Scottish National Party and First Minister Alex Salmond, say a Scottish nation would be able to spend more of the country’s oil wealth on social welfare initiatives. The ‘No’ side, including the UK’s ruling Conservative Party, argue that an independent Scotland would have to give up the pound and European Union membership, potentially catastrophic blows to the new country’s economy.
Some of the biggest companies headquartered or operating in Scotland have weighed in on the issue, threatening to pull out of the area or move operations if independence is approved. Here are five of the biggest.
Company: Royal Bank of Scotland (RBS)
What they do: Briefly the largest bank in the world, RBS has significant retail operations throughout the UK. In the wake of the financial crisis, the bank has drawn back from its investment and overseas units, selling off assets to concentrate on consumer and commercial banking on home turf.
What they said: “There are a number of material uncertainties arising from the Scottish referendum vote which could have a bearing on the bank’s credit ratings and the fiscal, monetary, legal and regulatory landscape to which it is subject.” (RBS statement, September 11, 2014)
Why it matters: RBS has been headquartered in Edinburgh since 1727, so its loss would be a major blow to the idea that operating in an independent Scotland would be business as usual. Despite its moniker, the bank is majority owned by the UK government as a whole after a 2008 bailout. While it employs a large number of people in Scotland, the bank has promised that the shifting of its head office is simply a technical procedure that would not result in any job losses. But moving headquarters would mean the loss to Scotland of a significant tax payer. RBS is a symbol of the country’s financial sector, and it has lead the stampede of banks publicly threatening to depart, a group which includes Lloyds, Clydesdale Bank and Tesco Bank.
Company: Weir Group
What they do: An engineering company focused on mining, oil and gas, and power equipment. Weir has a Canadian subsidiary, with the oil and gas division active in Alberta and Saskatchewan, and the minerals division supporting operations in Atlantic Canada. The company is listed on the London Stock Exchange and is a member of the FTSE 100, though it is headquartered in Glasgow.
What they said: “This is not bluff. This is not bluster. This is reality, not rhetoric. Companies do not make these announcements lightly. These are the very real risks businesses now have to address and they have the potential to have serious impacts on Scotland’s economy and the prosperity of her people. All business leaders have a fiduciary duty to do what is best for our shareholders and Weir will only continue to be based here if the business environment which has helped Weir grow into a truly global company continues to support our ambitions. That means certainty over issues like currency, certainty over issues like taxation and certainty over issues like EU membership.” (CEO Keith Cochrane, September 11, 2014)
Why it matters: The proceeds from North Sea oil would be key to an independent Scotland’s economic future, and disputes over their division helped set the referendum campaign in motion. The new nation would have 84% of the North Sea’s proven reserves in its waters, but proponents of the “Yes” and “No” campaigns differ on how much of that oil can be efficiently extracted, and the amount of revenue that would generate. Exploration and production companies have so far steered clear of taking sides, but Weir’s departure would deprive Scotland of a valuable link in the production chain just when the country most needs innovative solutions to boost oil output.
What they do: The French firm is one of Britain’s largest defence suppliers, employing 7,500 people across the United Kingdom. The defence sector is worth £22 billion to the country as a whole. Thales also have civil operations, producing the battery charging system for the Boeing 787, a model that was temporarily grounded by many airlines last year due to overheating problems. The company has 1,370 employees in Canada working at rail signalling, defence and aerospace operations.
What they said: “It is a major uncertainty. It would inevitably mean a freeze in investments, and we would have to reflect before making further investments in the light of the shrinking of the UK. I am also aware that this is very theoretical and we will have to see the results of the referendum. But what’s clear is that a group like Thales aims to have as its base for investment countries with ambitions and an amputated Britain without Scotland would create questions for us.” (CEO Jean-Bernard Levy, September 9, 2014)
Why it matters: Many of the 230,000 people working in the defence sector in the UK are based in Scotland; Thales subsidiary Thales Optronics employs 500 at a submarine periscope facility in Govan, Glasgow. The UK’s biggest defence contractor, BAE systems, is set to manufacture 13 warships for the Royal Navy in Scotland starting in 2016, although the company has not commented on what it would do if the country secedes. The Scottish National Party has declared its intention to remove Britain’s Trident nuclear deterrent from its soil if the referendum passes, but the newly independent nation would need some kind of defence force. A government white paper suggests the country’s defence budget would be in the order of £2.5 billion annually, but that may not be large enough to convince contractors to retain their manufacturing operations in Scotland.
Company: Standard Life
What they do: A pension-fund investment company, Standard Life has six million customers worldwide and £254 billion in assets. The company’s Canadian subsidiary was sold to Manulife Financial earlier this month for $4 billion. Standard Life is headquartered in Edinburgh, and listed on the London Stock Exchange.
What they said: “Standard Life has a long history in Scotland—a heritage of which we are very proud and we hope that this continues but our responsibility is to protect the interests of our customers, our shareholders, our people and other stakeholders in our business.” (Standard Life statement to shareholders, September 10, 2014)
Why it matters: The company is one of Scotland’s biggest employers, with 5,000 people—nearly half its global workforce—based there. Although it is remaining officially neutral on the vote, Standard Life has said it would transfer some of its operations south of the new border if necessary, a move that would likely result in some job losses. The movement of assets, including pensions and long-term savings, to England would also have tax implications for the newly-independent Scotland. Salmond has promised higher state pensions post-secession, and higher program spending to reflect what the Scottish National Party sees as a population more inclined towards social welfare than their English counterparts.
What they do: The world’s largest producer of spirits is headquartered in London, and is a constituent of the FTSE 100. Diageo is aggressively expanding overseas, championing agricultural reform in Africa to boost beer-destined barley yields, and investing in a new distillery in Kentucky to make more of its signature Johnnie Walker whisky.
What they said: “What we will fight for is keeping our industry competitive and thriving, and we’re very clear on what that requires.” (CEO Ivan Menezes, May 29, 2014)
Why it matters: Lovers of fine single malts need not fear—Scotland’s most famous export will remain firmly Scottish. Unlike other industries, spirits manufacturers cannot simply up and leave because whisky labelled “Scotch” must be produced in Scotland. Diageo owns 28 distilleries, and some of the output ends up in Johnnie Walker. While tax incentives for the whiskey industry would benefit manufacturers, the possibility that interest fluctuations or credit downgrades would hurt profitability has spirit producers worried. And small-scale manufacturers have had to put investment plans on hold, a significant concern for a product that must be aged for at least three years before it can be sold in the UK.