Booming Scottish financial industry struggles with growing prospect of ‘Scexit’
John Cronin, banking analyst at Goodbody, said the banking sector would be one of the hardest hit sectors if there was a split “given the bias of their business to the UK market” with taxpayer-backed NatWest , which employs more than 10,000 people. north of the border, being the most exposed alongside Virgin Money, TSB and Lloyds.
As a result, banks have been implementing contingency plans since the 2014 independence vote. NatWest recently reiterated that the bank would move its sprawling headquarters on the outskirts of Edinburgh out of Scotland after 294 years should the country become independent. Sturgeon fired back, saying she “did not accept” the justification that NatWest’s record was too big for an independent Scotland.
Former bank chairman Philip Hampton, who ran the lender in the years after the 2008 crash, doesn’t think a split would be existential for the lender or for financial services, although he says that much would depend on the conditions of a rupture. .
“I do not think so [independence] would be very important to NatWest – they could adapt, I think, without material cost or disruption, “says the FTSE 100 veteran.” On financial services in general, it would depend on the arrangements with Brussels and London. I suppose Brussels would try to be useful to a newly independent Scotland, because it is a pro-EU country. But much of the activity currently falls under English law and London regulation. [such as the FCA]. Scotland should therefore create alternative bodies or continue to try to use the existing scheme. The latter is not compatible with true independence and would require the UK to accept it.
“Scotland’s population is about two-thirds the size of Switzerland, which has a large financial services sector. So these things are possible. Edinburgh has long been a thriving center for asset management in particular. “
Yet the likelihood of a second referendum, dubbed IndyRef2, is still seen as a distant threat in city circles. Banking lobby groups are only keeping tabs on the issue as traders in London “basically ignore it until it becomes a serious possibility again,” says Neil Wilson, chief market analyst at market.com , noting that the horizon for traders is “three to six months at most”. Morgan Stanley analysts have set a possible date of independence at 2025 at the earliest.
“In the very unlikely event of Scottish independence there would be significant damage, but I would characterize it more as the fallout associated with the recession – damage to banks exposed to Scotland through income and bad debt – rather than structural issues, ”he says. Ian Gordon, Banking Analyst at Investec.
Having spent the last few years fighting for the UK’s future with the EU, discussions over the next few months will draw closer to home as Scotland’s booming financial sector grapples with the prospect of independence.