SCOTLAND: TROUBLED WATERS STRAIGHT AHEAD
Falling unemployment, higher numbers in work, upbeat business confidence surveys and Scotland set fair to top its pre-recession output peak this summer - what could go wrong? Just this, says Scot-Buzz editor Bill Jamieson - we are heading for troubled waters as the independence debate mounts in passion – and intensity.
Scary assertions, accusations of “bluff, bluster and bullying”, threats of debt obligation denial, impartial forecasts challenged on their impartiality and provenance; all this and five months still to go. Television debates are turning into a bear pit for participants.
At an independence referendum debate in Edinburgh last night, fears were expressed over how these divisions would heal in the event of a close No vote on September 18. After such an intense campaign, can they be healed?
Sandy Finlayson, senior partner in corporate finance group MBM Commercial warned of Scotland heading for divisions as bitter as those in Ireland. “This issue”, he declared, “is creating the biggest schism in Scotland since the Reformation”.
On latest opinion poll readings we are heading for a close result, with the majority for No to independence becoming ever slimmer.
If that is indeed the outcome, a large part of the population will feel disenfranchised – and frustrated. Are we really going to settle back to ‘status quo ante’ and life as before as if nothing had happened?
So far, there is little sign of significant adverse impact on Scottish business. We are enjoying our fair share of recovery.
But there is growing concern over the scale and depth of uncertainty now being faced. It’s the word that keeps cropping up in any discussion on the business outlook. And the area most vulnerable to persistent uncertainty is business investment and expansion.
Companies now have a potent motive to shelve and defer critical decisions on their future planning until the independence issue is settled. And such is the intensity of the battle now, that September 18 may be less the beginning of the end, than the end of the beginning.
It is not independence per se that troubles business so much as the uncertainty straight ahead.
And what is this “uncertainty” exactly?
A key reason why the debate has become so heated is frustration over the lack of answers on key points. We are, in effect, flying blind.
- If you work for a Scottish company, or have dealings with one, we need to know what currency we will be paid in, and, if different to sterling, what extra costs and charges there might be.
- If you work for a Scottish company or have dealings with one, we need to know what the tax regime is. Higher or lower? Simpler or more complicated?
- If you work for a Scottish company or have dealings with one, we need to know if Scotland is in the EU or not. Or half way in? Or membership pending?
- If you work for a Scottish company or have retired from one, what will be the pension arrangements? If you have saved through a private pension scheme with an English-based company, how will the EU regulations on cross-border pensions affect you?
- If you work with a Scottish financial company or invest with one, we need to know what the regulatory regime is and what the investor protection arrangements are should anything go wrong.
- And if a bank hits trouble (again) we need to know who is the lender of last resort?
These are not trick questions. They are not anti-independence questions. But for anyone doing business, it’s vital to know what the answers are!
Yet no-one can answer any of these questions for sure - not the Yes campaign, not Better Together, not the UK government, not the Scottish government.
And it’s not as if everything will be resolved on September 18.
If it is a No vote there will be will be intense clamour for more devolution to help unite the country. But what, exactly?
If it is a ‘Yes’ vote there will be protracted period of negotiation on dividing up the assets and liabilities. The mooted date for completion of these negotiations is spring 2016. Some believe this to be very optimistic, especially regarding matters related to the EU.
The closer we get to September 18, the greater and more urgent these questions become – and the greater the potential for uncertainty to inflict serious damage.
The mood, already troubled, could turn very sour. Somehow, over the next few months, we need as Scots to find the words and deeds to stop us flying apart.
SCOTS SMEs 'MORE CONFIDENT THAN UK'
Scottish small business confidence is now higher than the UK average, the latest Federation of Small Businesses’ (FSB) quarterly report shows.
The FSB’s Voice of Small Business Index, published yesterday shows that while small business confidence is growing across the UK, an average firm in Scotland is currently more bullish than its counterpart in England and Wales.
The analysis also shows that, as spare capacity in small business falls, recruitment intentions are at their highest level since the research began in the first quarter of 2010.
The Scottish Small Business Index, the FSB’s measure of small business confidence, rose substantially to plus 44 points in the second quarter of 2014, up 8 points from quarter one. This represents a substantial improvement from this time last year, when the index stood at just plus 9 points. Half of the small businesses surveyed expect business prospects to improve over the next three months, compared to just 12 per cent who expect them to deteriorate. Across the whole of the UK, the Small Business Index rose from plus 35.7 points to plus 39.7 points over the first quarter 2014, while the share of UK businesses expecting conditions to improve held steady at 47 per cent.
The proportion of Scottish firms reporting that they are running below capacity fell from 52 per cent at the start of the year to 46 per cent this quarter. Looking ahead, only 33 per cent of firms expect to be running below capacity during the next three months. Revenue and profits are looking healthier, too, with 37 per cent of respondents expecting revenues to increase over the next quarter. A balance of 16 per cent reported increased profits during the last quarter and 26 per cent of firms anticipate higher profits in the coming year. Further, 19 per cent of businesses plan to increase capital investment over the next year, compared to 8 per cent at this point in 2013.
Says Andy Willox, the FSB’s Scottish policy convenor, “While it is nice to see Scottish small business confidence climb above the UK average, more significant is the continued rise in small business confidence across the UK. Further, reduced levels of spare capacity means that more businesses are looking to recruit.
“This is good news for unemployed Scots and for the recovery – as is the fact that one in five businesses plan to increase capital investment this year. More businesses placing orders with suppliers means more full order books, more materials to be sourced and more staff to be hired. That is the key to rebuilding our economy.
“No matter how confident we are, though, none of this investment will happen without finance. Although the position has improved since this time last year, it has hardly moved in the last three months. We’ll need to keep a close eye on this trend and ensure things don’t start to slip back. Having worked so hard to build a recovery, we can’t have it stifled by a lending market which lacks our members’ ambition.”
Economy Forecast
08 Jul
- Tuesday
- Sunny
- Wed
- Thu
- Fri
- Sat
- Sun
- Mon
RETAIL LEVY 'PUSHING BUSINESS OUT OF SCOTLAND'
Scotland’s £95 million large retail levy “looks designed to push retail investment elsewhere”, the Scottish Retail Consortium claims in a pre-budget submission to Holyrood.
It argues that the non-domestic rates system “is no longer fit for purpose. It is a disincentive to invest in commercial premises, the tax seems to only ever rise, and retailers pay disproportionally more than other sectors.”
A comprehensive longer term overhaul of the business rates system is required, which would increase retailers’ confidence about investing in property, create more jobs and help revive high streets.
The large retail levy or ‘Tesco tax’ was brought in to assuage small firm concerns that the retail super-stores were sapping business from the high street and putting traditional and family businesses in jeopardy. Others saw it as a pure and simple tax grab by the Holyrood administration.
And there other improvements, the SRC argues, that can be made to support the retail industry. “The small firms’ relief is a welcome acknowledgement of the need to keep down costs, and avoiding the repatriation of control over the poundage rate to local authorities is sensible.”
However, it argues, the £95 million large retail levy was a significant departure from poundage rate parity.
“It has meant that for three years 240 retail outlets are paying 28% more than equivalent stores in Wales or England. The levy has been a conspicuous blot on the Scottish Government’s claims to have the most competitive rates regime in the UK.
“Indeed, the policy appears designed to push retail investment elsewhere in the UK, rather than attract it to Scotland, the very antithesis of the argument that the First Minister has been making recently in seeking to “rebalance the economic centre of gravity across these islands”. We welcome the pledge not to continue with the levy.
The SRC recommends that Scotland’s rate poundage rises no faster than that in England, it comes good on its promise not to renew the £95 million levy and rejuvenate the Business Rates Incentivisation Scheme to ensure that revenues accruing to local government from it are transparently re-invested in aiding town centre regeneration.
Transport is vital to the success of the retail industry. With 23,000 outlets in Scotland, located in every town and village, retailers rely on access to good quality and reliable transport for the daily operation of their businesses – for ease of access for customers, to deliver goods, and to enable employees to reach the workplace.
“We fully support the Scottish Government’s plans to dual the A9 between Perth and Inverness, and the A96 between Inverness and Aberdeen, but would urge a more ambitious timescale for delivery rather than the two decades currently envisaged. Improved connectivity to the North and North East will help unlock the economic potential of these two regions, help get goods swiftly to retail outlets as well as, as is increasingly the case, direct to customers.
