Financial Services

This bulletin focuses on elements of the paper entitled 'Scotland's Future - Your Guide to an Independent Scotland1' (also referred to as the 'White Paper').

Setting the scene:

Putting the Scottish Financial Services Industry in context

Contains the United Kingdom's 2nd largest financial centre 8% of Scottish GDP (generates around £8 billion for Scottish economy) 5% of private sector workforce (10% if indirect included) Insurance companies provide over 20% of FS industry jobs in Scotland (24% of all UK life insurance industry jobs are in Scotland) Manages over £800 billion of funds 4th largest centre in EU (after UK, France, Germany) Employs about 100,000 people directly (roughly same indirectly) Scotland's Financial Services Industry is therefore a major component of, and contributor to, Scotland's economy and to the lives of a great many of Scotland's people who will have a vote in the Referendum. For any government of an independent Scotland (regardless of its political composition) the financial services industry would need to be one of its key wealth generators.

What has the Scottish Government said about the importance of the Financial Services sector to an independent Scotland?

"......we have a strong financial services industry" 2 "Scotland has a diverse economy with key strengths across a range of sectors such as food and drink, tourism, creative industries, life sciences, universities, financial services and manufacturing." 3 The White paper therefore recognises the strength of the financial services industry in Scotland.

How should the White Paper be interpreted in the financial services context?

Without wishing to state the obvious, in considering the White Paper it is important to bear in mind how highly political a document it is. A lot of readers will want to find a blueprint in it but in reality it is closer to a manifesto and one that is inevitably directed primarily at its authors' view of those most likely to vote 'Yes'.

Financial Services and 'fairness'

Realistically, the financial services industry might be said to present certain challenges for the over-riding theme in the White Paper around 'fairness'.

This is particularly the case given the events in recent years surrounding the financial crisis and the issues surrounding banks and some of the excesses (real or perceived) which have emerged there. Equally, it is evident that financial services, in its widest sense, is at the heart of the City of London4 and the wealth creation that has been achieved there. This is particularly so since the so-called 'big bang' in the late 1980s. That was a big factor in giving rise to the concentration of jobs, resources, growth and development in and around London to the detriment of Scotland and the rest of the UK which is at the centre of the negative backdrop which the White Paper tries to paint. In many respects the values that underpin the success of London and the City represent the antithesis of the value principles that are used to underpin the White Paper and the approach that the Scottish Government is trying to take in it to appeal to those voters who might be most likely to vote 'Yes' in the Referendum.

In view of that reality, on one view it might be considered unsurprising that the White Paper could be viewed as being somewhat muted in what it says in relation to such an important industry and wealth generator to Scotland as the Financial Services Industry and the arguably lacks a coherent and detailed future for its growth and retention.

However, it should be emphasised that it is difficult to see why any government of an independent Scotland would want to consciously alienate that part of the current UK financial services industry which is located or based in Scotland (let alone its customers or shareholders who are nearly all located outside Scotland if not in England). Alienating such a significant industry, employer and source of tax...