The Scottish Independence Debate: Evidence from Business

Published: 18 March 2014
Author: Brad MacKay

On 18th March, 2014, Prof. Brad MacKay is launching the key findings from his ESRC research fellowship, exploring the business decision-making in conditions of constitutional and political uncertainty in Scotland and the United Kingdom. You can view the full report The Scottish Independence Debate: Evidence from Business. Here, Brad reflects on some his key findings. 

Study’s specifics

The study involved undertaking over 60 interviews between November 2013 and February 2014 with senior business leaders in randomly selected medium (over 50 employees) and large companies (over 250 employees and predominantly over 500 employees) from across a range of strategically important industries operating in Scotland. They included energy, engineering and manufacturing, electronics and technology, financial services and life sciences. Interviews were semi-structured, meaning that they were a conversation based on five questions relating to whether the referendum posed risks and/or opportunities, whether businesses were contingency planning, whether the prospect of a referendum was having a material impact on business decisions, and whether it might under different scenarios.


The research findings suggest uncertainties caused by the referendum vote on Scottish independence may have the potential to influence any number of business decisions, such as whether to invest, re-invest, expand, withdraw, locate or relocate business activity within or outside Scotland and the UK.

Potential Risks & Opportunities posed by the Independence Referendum

Our findings on the trade-off between potential risks and opportunities suggest risks to be hard and to relate closely to business activities, whereas opportunities appear to be soft and relate more closely to the politics of the debate.  According to the data, 90 percent of the business leaders are resolutely politically neutral, with few exceptions, and immensely proud of their Scottish links, but perceived the risks of independence to business to outweigh the opportunities so far identified. While it is uncertainty that is perceived as a key determinant of the challenges for businesses, specific uncertainties include the currency, followed by regulation, tax and the EU.

Specifically, our findings suggest that PLC companies headquartered in Scotland are potentially more affected than companies headquartered outside of Scotland. Moreover, companies that have a majority of their trade in the rUK rather than in Scotland (often at a ratio of 90% to 10%) appear far more affected than companies with the majority of their trade either in Scotland, or globally.

Companies that are medium sized and privately owned appear more willing to absorb downside risk than PLCs, who are more beholden to their shareholders. From those, medium sized companies which were foreign-owned companies, trading predominantly in a global market appeared to be less affected by the constitutional debate than PLCs with significant trade in the rUK.

In terms of the potential opportunities that the Scottish referendum may have for businesses across the five industries that we studied, 23 business leaders reported that they had yet to identify any obvious opportunities for their businesses, and a further 7 indicated the opportunities would be marginal. Of the 30 business leaders able to cite opportunities, only 8 were able to cite potential opportunities specific to market opportunities for products or services, rather than the enabling aspects of government policy such as R&D tax rebates, tax decrease or funding support. Six business leaders indicated that the drive towards the opportunities presented by independence outweigh the risks, or that the risks for their businesses are negligible, while 54 indicated that, at present, the risks outweigh any obvious opportunities presented. The reason for this may be that business leaders have not begun looking for opportunities in any material way due to the uncertainty associated with the referendum, or it may also be due to the possibility that the structural opportunities presented by a much smaller, independent Scotland with a market of 5.2 million, might also be smaller than a UK market of a combined 63 million people.

Contingency planning and effects on decision-making

At the time of conducting the interviews, contingency planning in firms ranged from not at all to tactically analysing the implications for specific products, services, premises and contracts, to more strategic plans to restructure the business so that economic activity, and in particular head office activity, could be moved elsewhere.

Of those businesses not contingency planning, reasons included the assumption that independence would not happen, the scale of uncertainty, contingency plans already being in place for business continuity, particularly for global companies, and finally, the perception that, either way, it would have little impact on their business. From the 60 interviewees, only 5 indicated that the debate had influenced business decisions, while the remaining 55 individuals indicated that it was business-as-usual.

Furthermore, the ownership structure of firms and whether their primary jurisdiction for trade is in the rest of the rUK also appears to be influencing contingency planning, and may well contribute to driving business behaviour under different constitutional scenarios.

Clearly, responses to questions about contingency planning reflect the time at which the interview was being conducted. Up until January stability in the polls and a general belief that there would be a ‘no’ vote affecting planning around the referendum vote. With the polls beginning to narrow, and a legal requirement that PLCs identify risks in their annual reports has begun to accelerate thinking around and planning for the referendum, as is evidenced by number of companies outlining their mitigation strategies in their annual reports in recent weeks.

Overall, the research proposes that in situations of extreme uncertainty, such as with the Scottish independence referendum, decisions are likely to be made on business fundamentals including a company’s relationship with their key stakeholder groups – customers, shareholders and employees. Separating out political and commercial decisions for medium and large businesses in most cases is challenging. Most large businesses are resolutely politically neutral, and are unlikely to take a political position, but a commercial decision that protects the prosperity of their shareholder groups. For many PLCs with significant trade in the rUK, this may, under some constitutional scenarios, mean restructuring their businesses so that their head offices are re-domiciled in the jurisdictions where the greatest proportion of their customers are located.