A recent Survation survey found that 36% of Scottish companies questioned would consider relocating should we get a Yes vote in September. It’s a big issue for investors, so which companies would be affected?
Not good for the banks?
Perhaps the obvious one is Royal Bank of Scotland (LSE: RBS). With its headquarters in Edinburgh, RBS would face a few problems. Firstly, a lack of any currency union between the two countries would make carrying out banking business that much harder. Even if Scotland were to informally adopt Sterling, the country’s banks would have no lender of last resort, with those facilities currently provided by the Bank of England.
And then there are European Union rules that require a bank to have its headquarters in the country in which it carries out the majority of its business — and whether Scotland would qualify for EU membership post-split is still open to debate. And, of course, RBS is still partly under government ownership, although it may well be fully re-privatized before independence — but there are calls for the bank to be split into two, just in case.
Similar concerns affect Lloyds Banking Group (LSE: LLOY), whose HBOS subsidiary has its headquarters in Edinburgh. At Lloyds’ AGM in early May, the company told us there is indeed risk for financial companies should Scotland leave the union, but admitted that as yet it had no plans for what to do in the event.
Standard Life (LSE: SL) has its HQ in the same city, and for its part has told us it intends to move at least a large part of its business south in the event of a Yes outcome. Again, currency uncertainty and EU membership were cited by chief executive David Nish as being amongst the major issues. While Standard Life employs around 5,000 people in Scotland, 90% of its UK customers are from other parts of the isles.
Engineering
Outside the finance world, things might sound less risky? But Scotland is home to power generation and temperature control specialist Aggreko (LSE: AGK), and earlier this year chief executive Rupert Soames claimed that independence would create “years of uncertainty” for the company, which has about 10% of its workforce in Scotland but does the bulk of its business outside the UK.
Minerals and oil & gas engineer Weir Group (LSE: WEIR) has made similar noises. Based in Glasgow but operating worldwide, Weir says independence will guarantee higher costs, with chief executive Keith Cochrane suggesting that currency uncertainties would make the firm more cautious over future investments in the UK.
High-tech
Scotland is also home to a number of smaller high-tech companies, like cloud computing pioneer Iomart, and we might expect such firms to be less affected by independence and for Silicon Glen to become a key part of an independent Scottish economy. But Iomart chief executive Angus MacSween has already called Scottish independence a “very silly idea“, and with most of the firm’s customers and data centres outside Scotland he says he’s prepared to move South.
Should the Yes movement win the day, we’ll no doubt have a lot of high-quality companies remaining in Scotland. But listening to what the bosses say, it’s pretty clear that even amongst those that stay, there’ll be a lot of extra costs to be borne — and you need to keep that in mind if you’re thinking of buying shares in them.