The Daily Telegraph - Business
Firms must warn of the mayhem of an SNP intent on independence
Business should speak up about the chaos that would follow a thumping victory by Sturgeon’s party in May
There is still a pandemic raging across the world. We are struggling to emerge from one of the deepest recessions on record. Government debt is spiralling out of control, and mass unemployment is only being held at bay by massive subsidy schemes. But, hey, maybe it is a good moment for a major constitutional crisis? The Scottish elections in three weeks’ time are turning effectively into a vote on independence, with the Scottish National Party committed to calling for a referendum on splitting up the UK.
But hold on. Shouldn’t businesses already be campaigning against that? The economic case for independence has always been threadbare, to put it mildly. But a combination of hard-ish Brexit and the Covid-19 crisis have made it even weaker than ever. Sure, businesses are reluctant to get involved in political arguments. The Nationalists are intolerant and will turn furiously on anyone who stands in their way. And yet businesses also have a duty to warn people of the chaos that would follow from a thumping victory for Nicola Sturgeon’s party – so that at least people know what they are voting for.
It remains to be seen who wins Scotland’s elections next month.
Despite internal clan warfare, and the launch of Alex Salmond’s Alba Party, the SNP looks on course for a decisive victory. Add in the votes of the Scottish Greens, also committed to backing independence, and Sturgeon will have a mandate to call for a re-run of the 2014 independence referendum. The government in Westminster does not have to concede that, but the pressure will be intense. In effect, anyone voting for the pro-independence parties on May 6 is also voting for a split even if the date of the divorce has still to be decided.
And yet the economic risks of that have grown far, far greater than they were when the first vote was held. It wasn’t exactly strong the first time around. Scotland had no plan for what currency it might use. It fudged the figures on debt. And it made wildly extravagant claims on growth with little evidence to back them up. And yet seven years on the case is substantially weaker. Here’s why.
First, the UK has left the European Union, and on terms that, as we have discovered over the last three months, have put significant barriers to trade between the two sides. If anyone in the Government is feeling mischievous they could appoint Michel Barnier as the man to lead the UK’s negotiations over “Scoxit” with Sturgeon. After all, he seems to be at a loose end. It would be amusing to watch him deliver endlessly smug lectures about preserving the “integrity of the UK’s single market”; demand oversight of Scottish laws forever to prevent “unfair competition”; and weaponise the border with Bute or Jura. Joking aside, the important point is this. The UK has learned that prioritising sovereignty over trade has costs. Scotland doesn’t even have the compensation that it is breaking away from a failing economic bloc, as the UK was when it left the EU, or that it could use its reclaimed powers to deregulate and boost growth. Instead, it will be breaking away from a fairly successful bloc, with a plan for joining a failing one. It will be painful.
Next, there is the Covid-19 crisis. Debt has exploded to pay for all the support schemes that have been put in place. The IFS estimates the Scottish budget deficit could hit an eyewatering 28pc of GDP. Even countries such as Italy and Spain cannot afford this crisis, which is why the EU has launched its €750bn Coronavirus Rescue Fund. But an independent Scotland wouldn’t be able to call on support from either the UK or the EU. It will have a new currency backed by a central bank no one has ever heard of monetising one of the steepest deficits in history. It is hard to think of a more calamitous programme ever set before an electorate by a mainstream party.
It is surely time for business to speak up about that. Most major British companies have substantial operations in Scotland. It is starting to become very uncertain whether those could be sustained in the event of independence. Edinburgh and Glasgow might have to lose “passporting” rights to sell financial services across the UK. Food would face tariffs and border checks. Freedom of movement would be scrapped. An austerity programme of Greek-style proportions – which led to a 30pc drop in GDP – would be needed to steady the new currency. CEOs should be making that clear over the next few weeks. After all, they were very happy to warn about the cost of Brexit. We heard a series of warnings about the impact leaving would have: some of those were exaggerated, but some also had some truth to them (investment hasn’t collapsed, but trade has fallen, and some production and distribution has inevitably shifted to mainland Europe). Last time around, lots of businesses did finally throw their weight behind preserving the union. A letter from 130 corporate leaders was published in the run-up to the vote warning of the costs of a divorce. The time has surely arrived for that to be repeated: if anything the warnings should be a lot more forceful this time around.
If a second referendum is scheduled for 2022 or 2023 it will hit trade and investment across the border immediately, especially if the polls indicate a close result. Scotland can vote for parties demanding a second referendum on independence if it wants to, of course. Some things matter more than the economy, and it is perfectly legitimate for people to decide they prefer to be poorer so long as they have control over their own affairs. But business should make sure people are aware of the likely costs – and they should make that clear before the Scottish vote in May instead of waiting for the referendum itself.
‘The case for a separate Scotland has always been threadbare, to put it mildly’