View more on these topics

The beginning of the end for Scottish financial services?

Havard Hughes

The trouble with regulation, as many in the industry will attest, is often the unintended consequences. The same is true of referenda. Even if Scotland votes to reject independence, as in Canada where another referendum followed the first 15 years later, the consequences will likely have a long shadow for the financial services sector. Unlike Quebec, Scotland has a disproportionately large and highly-successful financial services industry; banking assets alone are nearly thirteen times larger than Scotland’s entire GDP. 

For centuries firms based in Scotland have led the way in fields as diverse as asset management and banking. They are quite literally high street names across Britain. All have benefitted from a large stable market into which to sell their products. It was the Scottish industry that pioneered life insurance, investment trusts and professional standards. Consequently, Scotland is home of the oldest professional bodies of both banking and accountancy. Scottish firms manage £800bn in funds and the industry as a whole employs some 100,000 people. 

Before the crash, financial services would have been trumpeted as the flower of the Scottish economy with politicians falling over themselves to praise the industry. After all, you often hear the refrain “Scotland’s oil”. The paradox is that oil currently contributes only around £4bn to the Scottish economy, and falling. Yet according to Scottish Financial Enterprise, financial services contributes nearly double this at some £7bn.  The unpopularity of bankers has meant that few in Scotland are prepared to speak-up for what has become, almost overnight, an unpopular cause.

Even assuming the separatist vision accords to the reality, the risks for the industry are profound. Firms would have to operate under different tax and legal regimes, apply for re-authorisation and be separated from the majority of their customers by a new national boundary. 

The conversations are, however, taking place in the shadows. Few in the industry in Scotland wish to enter the political fray. Fewer still to incur the wrath of the nationalist establishment and their vicious keyboard-tapping band of “cybernats”. Consequently, many of Scotland’s largest firms have been forced to explore the implication of independence and to raise any concerns behind closed doors. Only a brave few such as Standard Life have publicly spelt out the consequences.  

Until such a time as all the uncertainty is resolved one place where there will be little silence and where the lights will burn extra bright are the offices of London law firms. The tragedy for jobs in the Scottish financial services sector is the effect of momentum. Having taken such expensive advice, anticipating the risk of future secession, many institutions will conclude that they might as well go ahead and move.  You only have to look to Canada to see what can happen to a financial centre faced with recurring political uncertainty caused by a “neverendum”.

According to Mark Milke of the Canadian think-tank the Fraser Institute, Montreal has slipped from being the “Gibraltar of the Canadian provinces” after the Great Depression of the 20th Century to being merely the third-largest home of head offices in Canada in the 21st.  The blame for this decline is laid squarely on Quebec’s high-taxing nationalist governments.

Firms have literally been driven into the arms of neighbouring provinces. Even the Bank of Montreal has moved its headquarters to Toronto, retaining only a fig-leaf presence in Montreal itself. An omen perhaps for what might happen to RBS’s sprawling Gogarburn headquarters? Only time will tell. 

With all the parties pledging greater devolution and tax and spending powers for the Edinburgh Parliament, the Scottish financial services sector could be facing a perfect storm. London’s lawyers and financiers will be rubbing their hands with glee. This is surely not what the nationalist cause intended. 

Havard Hughes is head of public affairs at MRM



Chris Gilchrist: Avoiding the risk iceberg

Advice firms have generally treated formal assessment of clients’ tolerance of risk as an unwelcome necessity imposed by FCA rules, as evidenced by responses to a recent flurry of articles in Money Marketing. The trouble is the box-ticky ‘regulation-lite’ solutions many have adopted might be appropriate for simplified advice but are rarely up to the […]


Intrinsic reveals £9.5m PosSol deal

Intrinsic accounts published today reveal the firm agreed a deferred consideration of £9.5m to acquire Positive Solutions.  The firm made a pre-tax loss of £3.2m to end of December 2013, down from a £24m profit in 2012. During the year it acquired national PosSol in a deal worth a total £19m, including a £9.1m loan […]


Ana Botin succeeds her father as Santander group chair

Santander UK’s chief executive Ana Botin has become the banking group’s executive chairman following her father Emilio Botin’s death after 28 years at the helm. Botin has lead the group’s UK arm for three and half years and until a new chief executive is recruited deputy chief executive Nathan Bostock will fill in. Santander UK […]

Boosting our annuity strategies

Targeting annuity purchase in lifestyle strategies isn’t anything new but we’ve just lifted the bonnet and injected an enhancement shot into the end-point of these solutions. The recent volatility has shot short-term volatility into equity markets and painted a very turbulent backdrop but we’re also equally faced with a stressed fixed interest environment. This can […]


News and expert analysis straight to your inbox

Sign up


There are 22 comments at the moment, we would love to hear your opinion too.

  1. Perhaps Scotland will become another offshore financial centre like Guernsey, Jersey, Isle of Man, etc. Guernsey is part of Great Britain but not the UK, has it’s own government but is defended by the UK, prints its own currency but also uses the UK pound. Its an associate but not a full member of the EU, meaning it gets most of the benefits without any of the so called ‘encumbrances’.

    The Queen is technically the Duchess of Normandy but still regards the islands as part of her realm.

    There’s no corporation tax, maximum 20% income tax, no VAT and too many cars!

  2. Havard Hughes, you make so many skewed opinions of facts it is difficult to know where to begin. To draw connections with Canada and Scotland is your prerogative but there are as many if not more significant differences than similarities. I see you had the good sense to have your heading as a question because I see no real point to your article. Are you saying Scotland is a great country with huge expertise that will adapt well in new circumstances as it has done so often in the past? Are you highlighting a general lack of certainty in UK politics? Either way I would like to point out some corrections, Scotland does not currently have oil, finance or any other industry paying into it’s economy, it does not have one! This is why Scottish people are voting on getting control over tax and spending, to create a fairer economy for the people of Scotland by the people of Scotland. London looks nice in your photo by the way, clever bit of staging there.

  3. I don’t mind when individuals post pro or anti Scottish independence views. However, I’m just wondering if this is the same Havard Hughes who contested the Brent Constituency for the Lib Dems in 2001 and 2005? If it is then I think he should have had the decency to mention that as a Lib Dem – they openly reject Scottish Independence, his opinion was somewhat biased!

  4. It was not the potential for Scotland seeking Independence and control – which has led to the death of Fiancial Services in Scotland. To look into these you need to go back in history . . to find sections of Sctland and their people who were successful in industry – which required a cash facility – banks and providers for the poor insurance companies such as Scottish widows for widows and orphans ( a form of welfare state using Mutual Companies – who were moral operated ethically and for mutual benefit). Now alas thanks to Avarice and Greed – and utter stupidity – the Directors and Trustees think they can ( and they Do ) – react with utter contempt for clients and their agents . . . .for their own benefit – refusing to act with the Duty of Care required – when looking after other peoples money. The failure of everyone in the Boardroom – the Chairman – the Finance Director . . .ALL PETRIFIED AND BULLIED – that if they alert the authorities – the remaining TRUSTEES – will refuse to pay out their pension ( as they Did – and CONTINUE TO DO with my cash Equivalent – from Scottish Widows Retirement Benefits Scheme – owned by Lloyds and TSB ( and their derivatives ). Put simply these organisations are NOT FIT FOR PURPOSE ! Currently after the insurance companies destroyed peoples Endowment Policies – and their savings – the insurance companies are now attacking their Pensions ( in the most heinous and malicious attack on THEIR CLIENTS – their customers – the reason given ” BECASUE THEY CAN “. No one will take responsibility ( where is Mr Wheatley ? ) Where is David Cameron ? Where is George Osborne ? where is Mark Carney ? Where is the Serious Organised Crime Agency ? Where are Trading Standards ? Where has all the money gone ? Offshore trusts ? It may be in my opinion the FINES applied are in fact a form of Protection Money . . . .to their benefactor, THEIR PROECTOR – right up to the highest levels in Government IE David Cameron PM ( or higher ) ? ? ? ?
    Now with auto enrolment – the NEW increases in National Insurance Tax for employers and employees – and the opportunity offered by George Osborne to take YOUR ENTIRE PENSION FUND – Less Goerge Osborne’s INCREASED . . . .TAX TAKE (40 % Tax and 15 % Surcharge = 55 % ) George will RIP OFF THE POOR AGAIN . . .and many of the Middle Classes . . . . then he can REMOVE THE TAX FREE LUMP SUM AT COMMENCEMENT using his strategy – to implode PENSION SCHEME ARANGEMENTS . . .as long term savings vehicles , destroying the vary last long term useful savings vehicle. These people need to be stopped – they ( the Conservative Government are committing heinous . . . . Crimes against – the voting public but mainly . . . . the Poor and the Vulnerable – the middle classes – who will need to sell of their homes – to pay for education of their children. No wonder Scotland wishes to take control operate Independence in a most . . . Fair Society – rather than the selfish and most incompetent Government in History ( and that includes the Scottish labour Government led by the warmonger Blair, the petulant Gordon Brown, who skips out of Downing Street and Alastair Darling – an Edinburgh economic mess in waiting . . the Mr NO ! of Edinburgh’s version of Scottish politics ) . . . . . .

  5. Let’s face it the Scots (or around half of them) aren’t really rejecting the UK, they’re rejecting the Tories. I can understand that!

  6. There should be two votes. One to give a mandate to negotiate an independence settlement, and another to accept or reject the negotiated outcome. The residents of Scotland are voting blind. If they say yes they are going to have to put up with whatever emerges. The Westminster parties are going to be under huge pressure to drive a hard bargain. If it all goes belly up a new political force may emerge with a commitment to restore the 1707 settlement. Either way, anyone predicting the outcome of all this with any confidence is brave to the point of foolhardy.

  7. Presumably if Scotland is not in the EEA then presumably any Scottish provider’s collective investment schemes will be unregulated.

  8. False references aside, any article using loaded language such as ‘cybernats’ and ‘separatists’ can be safely dismissed as myopic.

  9. Those who fail to learn from history…, so it is useful to hear of historical similarities.
    The problem with the debate on Scottish Independence is that it has, in the main, been on the very narrow base of money, and solely about Scotland’s money. The latter comment is a fundamental reason for Scotland wanting separation from England (but not necessarily the UK) – the English are so absorbed in themselves that they have no understanding about any one else. Westminster seems so oblivious about what happens outside a 50 mile circle around London that I wouldn’t be surprised if some of the northern counties didn’t consider attaching themselves with a “free” Scotland if it makes a success of the break. A large reason for Scotland making a break is embedded in deep cultural differences, that are not understood by London.
    I suspect that only now are the English starting to understand that if the break comes there will be repercussions on England at many levels. The debate should have been about the structure of the UK. The world has changed many times in the last 300 years but it is not obvious that the UK has adapted too well internally or externally in recent times.
    I do agree with Graeme Laws about the two votes. I believe that Alex Salmond has bought a bit of a pup on this one, which suggests he was at least as interested in his own position in Scottish History as he was about Scottish History.

  10. Scotland used Quantitative easing in around 1879. The point of bringing in Gordon Brown – at this late stage to act as the petulant rucking rampant representative of Scotland – by the missing Prime Minister David Cameron – demonstrates the futility and unwillingness of Cameron – to provide ANY serious concessions. The reason for independence is to reduce Central Control – reduce Tax – and to offer services like the NHS without David Cameron’s crazy . . . . .restrictions. Apparently since David Cameron went Norf . . .is hiding out in a girls school – the conservative Party numbers equal those of Edinburgh’s Panda – IE Two – not three . The misleading statements by politicians – who I thought had to tell the truth ( otherwise it is a criminal offence ) to constituents – and their promises need to be kept – if they wish to retain integrity – so the gofor, Gordon Brown (under Blair ) his promises IN THE FUTURE ( like his taxes ) are foreign and fail – and his use of St Andrews night and Burns Night in his ” forward planning – by taking steps backward should be ignored. After he skipped out of Downing Street – after ruining the United Kingdom and selling off Englands assets ( gold reserves at the lowest price – and is the main cause – of the current and ongoing recession and the HIGHEST TAXES in decades. His wrecking of the pensions industry and his Tax applications dealt on the pensions industry – means he cannot be trusted. Brown is as petulant as he is not competent. His failure to lead his party or any nation . . .during his turmoil years – before claiming to fall back on looking after his family . . . .The people of Scotland ( including vast numbers of English – wish to have democracy and control over their country – rather than be dictated to by Incompetent Cameron and his Cronies – who are not fit for purpose. Labour party will be reduced in Scotland – so that only the fit survive – and run Scotland efficiently and effectively. It is unlikely that Darling could offer any benefit to the Scottish Parliament – and with Browns effort – and utter Failure in parliament – he will be lucky to get on board the Kirkcaldy council . . . . . .or a skool governor . . . . .( see signs alongside M90 )

  11. To suggest this referendum has come about due to one man’s ego or even a few over zealous Nationalists completely ignores the systematic failings of Westminster and lack of investment in Scotland for many years. The advent of instant social communications has changed the game and elitists should appreciate this is only the beginning. A desire for self governance in a bottom up society is sweeping the world, not just the UK.

  12. Its not clear from whence Steven Balmer’s comments arise. Since they raise interesting points perhaps a little more body to the comments would add to the debate. It would, for example, be rather interesting to see Italy breaking up into the States from whence it came, but is it likely? And perhaps Prussia may take its militarism out of a “disintegrating’ Germany. Given that countries appear to be anxious to join the EU in droves (UKIP excepted) a clearer outline of the world wide fragmentation movement would be of interest.

  13. Independence, like D I V OR C E is a fundamental breakdown – irretrievable and each party seeing control> Currently the Con servatives and Liberals have control – and have not used it wisely or properly in a democratic society. You do not need to enquire after a spouse for a divorce – merely give the reason for the breakdown . . .and agree a divorce – or fight it out in Courts. I believe the Untied Kingdom has more to gain form going it alone – supported by UKIP rather than the current bunch of incompetents. The REAL reason this crop of CON servatives are in Government – albeit propped up by the Liberal Party – is the lack of people going out to vote – abstinence through laziness . . .perhaps the number of people who are engaged in Scotland ( from 16 year olds upwards ) – will demonstrate that if you are lazy and uninterested – you can hardly complain when you get a crap, slippery government with a pathetic leader – who runs around in a wet suit . . .to demonstrate he is a wet .

  14. Ian, laziness is not always the reason why people don’t vote. Many don’t because they don’t believe in any of the parties on offer and think tactical voting is unacceptable. Voting is of course a fundamental freedom, so is the freedom not to vote.

  15. As Graeme Laws said anyone predicting confidently that Scotland will be better off on all fronts out of the union is being dangerously optimistic. I have no doubt that in some areas Scotland will be better off but almost certainly in other areas the Scots will be worse off. Currently no one knows which areas will be which.

    Alex Salmond has led a campaign that has relied on Scottish patriotism to blind voters to the fact that no one knows what is going to happen after Sept 18th and the ‘No’ campaign has badly misjudged how to engage the Scottish public.

    I don’t get a vote but if i did i would vote to preserve the union because i think we’re all better off in than out. Fingers crossed for a no vote but it is going to be close.

  16. Glen McKeoen must live in London as he seems to think that is the sole city in England.

  17. I think this is a great opportunity for Edinburgh nsurance comapneis and Banks . .to change. . .to provide Real Service – to look after clients money – rather than feather their own nests with huge salaries and bonuses. The competition should help to improve service – and the dead wood can be removed form these reckless financial instituions . . . . . .or . . .down in the mire. . . . ( bog ) . . .of poor administration bad service and replaced by competent companies.

  18. @nick

    To suggest this campaign is about ‘blind patriotism’ not only shows a stunning lack of understanding but is also completely wrong.

    It he only people who have mentioned patriotism and nationalism are Better Together and their cohorts.

    I challenge you to find any reference to the above from the Yes campaign, which by the way is not a top down government lead campaign but a broad grassroots movement encompassing people from across the social spectrum, something the no campaign cannot claim.

    As for the article it completely ignores the reason for our successful FS industry, which is the people.

    If RBS wants to register is head office in London then great. RBS does not currently pay any corporation tax into the ‘Scottish exchequer’.

    The jobs we are happy to keep as conformed by the CEO.

    I haven’t seen any mention of Aberdeen Asset managements positive view on independence here either!!??? Wonder why?

  19. @Adrian

    I didn’t say the campaign is about ‘blind patriotism’ i said patriotism has been used to blind voters. A subtle change of wording but a significant change of meaning. I don’t think Alex Salmond has to utter the exact words but the message he is sending is that Scotland will be better off if the Scottish control things and go it alone. Is that not a patriotic message?

    Why can the No campaign not claim to be “a broad grassroots movement encompassing people from across the social spectrum”? Aren’t ‘No’ voters from across the social spectrum? Doesn’t the ‘No’ campaign have grass roots support?

  20. “May your choices reflect your hopes, not your fears.” – Nelson Mandela.

    The pollsters, the politicians, and the media refer to the vote on Thursday as “too close to call”.

    Might those words of Mandela illustrate why the polls are showing a near 50/50 vote?

    I suspect they do.

  21. “The best argument against democracy is a five-minute conversation with the average voter.”
    ? Winston Churchill

  22. The Noes say Scotland will be worse off; the Yeses say Scotland will be better off. The fact is that no-one knows the future, or futures timeline. Its all advertising puff.
    I haven’t seen any sensible prognosis that suggests that Scotland will be bankrupt in months, with 5m starving people, so there must be more to this debate than the very narrow financial arguments that hold say in the financial press.
    I would suggest that a core aspect of the debate in Scotland is taking a level of control in their own affairs and future. The bigger an enterprise becomes there more difficult it becomes for each and every individual to feel that they are important in the whole. Perhaps Scotland is feeling under loved in the Union. Merely saying please stay in the Union so that we can make more money is hardly a warm and comforting endorsement of affection.
    The UK are part of the EU and there is growing discomfort with the belief that the UK Parliament is in control of anything. The fact can be very different from the reality, but that doesn’t impact on the perception. A process that UKIP are, with some success, making into a one dimensional policy.
    The perception in Scotland is that they are a different country from England on many levels – forget better or worse, just accept different. The perception is that they have little control over the differences and that they are slowly being “Anglo-fied” and that to retain their separate identity they have to become more aggressively Scottish within the current Union.
    There is no sense of a partnership between adult countries, which distorts too many institutions and attitudes.
    Having attained independence (mainly) Ireland is now has a confidence in itself and does not need to be stage Irish to maintain its identity. The relationship between Ireland & the UK has rarely been better, or more mature.
    By taking control of themselves Scotland would like to attain such a position for themselves. A position that allows a more mature and less aggressive attitude to its next door neighbor.
    If there is any question about this interpretation just look at the immature comments in so many blogs on the subject, amounting to “Scotland must be daft taking such a risk”.
    Independence is not exclusively about monetary matters – it’s a lot more about about being treated with respect. Money may be a factor in this, but it far from being either the sole factor or the major factor.
    Partnership with England has been beneficial, if one considers Scotland’s state in 1707, but times change as do relationships. Perhaps it is also necessary for England to let go, and to learn to stand on its own two feet. Whoops, sorry, it will still have Wales to lean on.
    And by the way Sean, I do not live in London, though I did for many years, as well as many other places in the UK. London does however consider itself to be the only place of merit in the UK, other than when one wants to play golf.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm