QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY - June 2014
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QUILTER CHEVIOT
SCOTTISH INDEPENDENCE SURVEY
June 2014
INTRODUCTION
Thursday 18th September 2014 will be a As our contribution to the debate, rather than
momentous date for the future of Scotland and just provide our view, we have decided to ask our
the United Kingdom as a whole. peers to complete the Quilter Cheviot Scottish
Independent Survey and this white paper
Scotland’s voters will head to the polls to decide
discloses the findings of that snap poll.
on the biggest question for a generation:
We asked 100 financial advisers in Scotland
Should Scotland be an independent country?
– the Quilter Cheviot 100 – for their views on
The latest opinion polls reveal a narrowing of independence and its ramifications.
the gap between the Yes and No campaigns
The headline finding will not make for
and, with as many as 15 per cent of voters
comfortable reading for Alex Salmond and the
still undecided, the poll could go either way
SNP. Some 82% believe that Scotland should not
with opposing arguments likely to reach a
vote for independence.
new intensity as we enter the final months of
campaigning. Balanced against this, however, is a strong
sense that further devolution of power is both
Certainly whether Scotland would be worse or
necessary and desirable.
better off as a separate state is, according to
the Scottish Government, the most important It is clear from these findings that those who we
question. Naturally, they say Scotland would be surveyed are against an outright independent
better off. nation but would like to see more powers and
more decision-making based in Scotland.
Independence, however, is an uncertain business;
a new state might gain new freedoms but We would like to thank the Quilter Cheviot 100
would lose present sources of stability, and for completing the survey and providing the
some questions about independence are simply insight into their thinking.
unanswerable in advance.
02
QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY
DO YOU THINK SCOTLAND SHOULD VOTE FOR INDEPENDENCE IN THE REFERENDUM?
An overwhelming 82% of the respondents to our poll voted No, with just 16% voting Yes. Only 2%
were undecided.
The results are in contrast to the latest general opinion polls where opinion on independence is much
more divided.
The views emerging from finance professionals in our poll may be a reflection of the high degree of
uncertainty which exists over the implications of independence for the finance sector.
Scottish Financial Enterprise, the trade body for 110 banks, insurers, finance firms and pension
companies, has recently said there are too many unknowns over which currency and central bank
Scotland would use, the impact of its EU membership talks and the effects of two diverging markets
replacing the UK’s current single market.
It believes the scale and complexity of the task facing Scotland after a yes vote cast real doubt
on whether the Scottish government’s target of declaring independence in March 2016 would be
achievable.
The consensus is probably also a reflection of the value of the rest of the British economy to Scotland
– and concern if this trading relationship was put at risk. Scotland’s exports to the rest of Britain are
currently about twice as great as Scotland’s overseas exports (according to Scottish government
figures) which means a significant reliance on markets south of the border.
What is clear, despite the interventions of senior political figures from both sides of the border, is that
there remain many questions unanswered or only partially answered.
2%
16%
DO YOU THINK SCOTLAND
SHOULD VOTE FOR No
INDEPENDENCE IN THE Yes
Undecided
REFERENDUM?
82%
03
DO YOU THINK AN INDEPENDENT SCOTLAND DO YOU THINK AN INDEPENDENT SCOTLAND
WOULD BENEFIT FROM ADOPTING THE EURO SHOULD REMAIN IN THE EUROPEAN UNION?
AS ITS SINGLE CURRENCY?
Three quarters of the financial professionals
Almost nine out of ten (88%) of our respondents who responded to our poll said an independent
said an independent Scotland would not benefit Scotland should remain in the EU, while 16% said
from adopting the Euro – a reflection, perhaps, of it should not and 9% were undecided.
the Eurozone’s economic difficulties since 2008.
The issue of EU membership is likely to be a key
The currency issue remains one of the key factor in the independence debate as it will be
questions associated with independence, with in the UK general election next year, with the
a future independent Scottish government Conservatives pledging an in out referendum
needing to plan for Scotland creating a new on the issue should they retain power in
currency or unilateral use of the pound after the Westminster.
chancellor, George Osborne, vetoed the Scottish
Potential membership of the EU for an
government’s call for a sterling zone.
independent Scotland is far from clear cut and
The Scottish government’s proposals for would be inextricably linked to the country’s
a currency union are experimental and position on currency. Any membership could be
unprecedented in the EUand could be far subject to complex treaty changes and post‐
more difficult for Scotland than many people referendum negotiations.
appreciate.
Some observers believe it is almost impossible
to predict what those negotiations would result
in and what the views would be of other EU
member states.
The positive response in our poll is a general
reflection, however, of the benefits which EU
membership brings to Scotland and the UK as a
whole.
04QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY
DO YOU THINK SCOTLAND WOULD RETAIN A DO YOU THINK AN INDEPENDENT SCOTLAND
FAIR SHARE OF NORTH SEA OIL RESERVES IF WOULD HAVE TO RAISE TAXES IN ORDER TO
IT WAS GRANTED INDEPENDENCE? MAINTAIN PUBLIC SPENDING?
Our poll revealed substantial concern over Some 84% of respondents in our survey said an
whether an independent Scotland would retain a independent Scotland would have to raise taxes
fair share of North Sea oil reserves. in order to maintain public spending, while only
5% thought this would not be the case and 11%
Some 56% of respondents thought it would,
said they didn’t know.
while a significant 26% though it would not and
some 18% didn’t know. There can be no doubt that public sector
spending per person is higher in Scotland than
The future of North Sea oil is one of the key
the UK average and that has long been the case.
campaign battlegrounds ahead of the Scottish
independence referendum. There are two main reasons for that. Firstly, the
large geographical area means that the costs of
Office for Budget Responsibility data indicates
providing schools, roads and many other public
that since the first licences were issued for the
services are more expensive, particularly in rural
extraction of oil and gas from the North Sea in
areas like the Highlands and Islands.
1964, about 42 billion barrels of oil have been
produced. It is estimated there could be up to 24 Secondly, the historical dominance of the Labour
billion more in untapped reserves. Party of many local authorities resulted in higher-
than-average public spending. That trend has
The industry employs 450,000 people across the
continued under the current SNP government.
UK and in 2012-13 the industry paid £6.5 billion in
taxes to the UK government. The critical issues are clearly the North Sea oil
and gas tax revenues. These have been very high
Prime Minister David Cameron believes the UK,
in recent years because of high oil prices, with
with Scotland remaining part of the Union, would
Brent crude trading at over US$100 per barrel.
be best placed to fund future exploration and
However, the latest Government Expenditure
exploit the increasingly hard-to-reach oil and
and Revenue Scotland (GERS) report states that
gas resources. He also said a united UK would be
these fell by -41.5% between 2011-12 and 2012-13.
better able to cope with fluctuations in oil prices.
That is a steep fall and production figures can
But Scottish First Minister Alex Salmond insists
be erratic. The long term trend is, however,
an independent Scotland could withstand the
downwards.
volatility of the oil market. He wants to set up a
Norwegian-style sovereign wealth fund - setting Further, operating and development costs in the
aside a proportion of oil and gas revenue each North Sea have risen substantially, which implies
year - to help offset some of the problems lower tax revenues, and there is the added
caused by the price fluctuations. complication of the costs of decommissioning
fields such as Brent and Murchison when they
According to the New York Times, the Norwegian
cease production.
fund was worth an estimated $840 billion in
February this year. It was set up in 1990, initially It is therefore entirely possible that the Scottish
to help cope with the rising costs of pensions for budget deficit could worsen over the next
a population that was living longer, and also to decade so it is little surprise that our respondents
accommodate changes in oil prices. believe more taxes would have to be raised to
maintain current levels of public spending.
05DO YOU THINK AN INDEPENDENT SCOTLAND DO YOU THINK AN INDEPENDENT SCOTLAND
WOULD HAVE FARED BETTER OR WORSE SHOULD GET RID OF THE UK’S NUCLEAR
DURING THE BANKING CRISIS? WEAPONS?
An overwhelming majority of our respondents – There was less unanimity over whether an
some 87% - believe Scotland would have fared independent Scotland should retain or ditch
worse during the banking crisis had it been the UK’s nuclear weapons, with six out of 10
an independent country. Today, Scotland is a respondents wanting to retain them and 28%
successful part of the UK economy and a strong saying Scotland should get rid of them. A total of
case can – and is – being made that maintaining 12% of our respondents were unsure.
the union is in Scotland’s best economic interest.
The current Scottish Government’s priorities
This case rests on the foundation that the UK is for defence would include removal of Trident
a well-developed economic union, with a single nuclear submarines from the Faslane naval base
domestic market, in which goods and services, within the first five year term of an independent
capital and labour can move freely to take up Scottish Parliament. Instead, Faslane will become
opportunities, unhindered by international the main naval base and joint headquarters for a
boundaries and not distorted by regulatory conventional armed forces.
arbitrage.
A timetable proposed by the Scottish Campaign
It is also a well-functioning fiscal union which, for Nuclear Disarmament would see nuclear
together with an effective banking union, submarines recalled to the Faslane naval base
supports both a single currency and a system of and their missiles disabled. Within two years, the
social solidarity that promotes social cohesion. warheads would be removed from Scotland.
Our respondents’ views on stability in a crisis are Finally, within four years the process of
most likely based on the fact that the UK in its dismantling the weapons could be completed.
current guise pools economic and other risks,
The current Scottish Government’s view (as
and so absorbs economic shocks such as those
set out in “Scotland’s Future: Your Guide to an
precipitated by the banking crisis.
Independent Scotland”) is that agreement would
An independent Scotland would have to manage be required for the ‘speediest safe’ removal of
these in other ways, and that would require a the weapons - at some point within the first term
transition to a different approach to economic of an independent Scottish Government.
management.
It would then be for the UK government to
decide whether to rehouse the weapons
elsewhere.
06QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY
DO YOU THINK THAT SCOTLAND WOULD BE IF SCOTLAND DOES NOT GET
ECONOMICALLY STRONGER IF IT DOES NOT INDEPENDENCE, DO YOU THINK IT SHOULD
GET INDEPENDENCE AND REMAINS IN THE HAVE GREATER FINANCIAL POWERS AS PART
UK? OF THE UK?
Seven out of 10 of our respondents believe A total of 65% of our respondents said they
Scotland would be economically stronger if it would wish Scotland to have greater financial
remains in the UK. Some 22% said it would not be powers if it remained as part of the UK, while
stronger and 8% said they didn’t know. 28% said not and 7% were undecided.
The possibility that Scotland might in the long The Scottish Government already controls a
run be more successful as a separate state than significant proportion of Scotland’s government
within the UK cannot be ruled out: there are spending, covering areas such as education,
simply too many uncertainties to be sure about health and policing. The Scotland Act 2012
that. granted even more power to the Scottish
Government.
Yet some things can be said with reasonable
confidence. An independent Scotland might face As part of the UK, the Scottish Government
immediate and very substantial fiscal challenges would be able to set a Scottish rate of income
and whatever the very long term economic tax from April 2016. From next April, the Scottish
trajectory of an independent Scotland might be, Government in its current guise will also be able
there would inevitably be a period of transition to borrow up to £2.2 billion in order to invest
during which Scotland could be worse off. further in Scotland’s infrastructure.
Perhaps the most striking aspect of Scotland’s Altogether, the Scotland Act 2012 represents one
reliance on union is the fact that Scotland’s of the greatest devolutions of financial powers
biggest customer for exports by far is the rest of within the UK for over 300 years.
the UK.
Despite these impending changes, a majority
Scotland is also the biggest hub for financial of our respondents – although not to an
services in the UK outside of London, with an overwhelming extent – clearly have an appetite
estimated 185,000 jobs dependent on the sector for further devolution.
according to an analysis by the UK Government
in May 2013. About 90% of the customers
of these businesses are elsewhere in the UK.
Similarly, Scotland builds the UK’s warships.
Both of these sectors could be affected by the
creation of an international border. Financial
services is highly regulated, and although
services can be and are provided cross-border
in the EU, it is possible that providers would
wish to relocate to the regulatory domain which
contained the majority of their customers.
Similarly, if they can, countries tend to buy
defence equipment from within their own
borders, and this has long been the UK policy
for warships. Independence would therefore
potentially impact on that particular industry and
its substantial supply chain.
07IF SCOTLAND DOES NOT GET INDEPENDENCE, DO YOU
THINK IT SHOULD HAVE GREATER LEGAL POWERS AS
PART OF THE UK?
60% of the financial professionals surveyed said they would like
to see Scotland get greater legal powers. 33% said it should not
get extra powers and 7% were undecided.
Just as respondents generally favoured further devolution
of financial powers, our poll indicates a cautious appetite for
further legal powers as well.
Together, these results tell us there is a genuine desire for
further devolution across all areas of civic responsibility – but
falling short of outright independence.
08QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY
FINAL THOUGHTS
It is important to explicitly reiterate that Quilter What would happen to Scotland’s currency?
Cheviot is not adopting a position on the Scottish Where would the country sit within the European
independence position with this survey and the Union? What would the impacts be on public
Quilter Cheviot Scottish Independence Survey. spending, tax-raising and North Sea oil revenues?
Instead, our objective was to seek the views Such uncertainty is anathema to those managing
of those in the financial services industry – investments and the financial well-being of
principally individuals concerned with the families, trusts and charities.
management of the interests of high net worth
In addition, we know that many in the financial
individuals.
services sector rely to a great extent on clients,
What emerges from our snapshot is a degree partners and colleagues in London and elsewhere
of resistance to full-scale independence but an in the UK. There is undoubtedly concern over
appetite for further devolution. potential disruption to these relationships in the
form of new barriers to trade or new regulatory
Our view is that this conservatism is in part
constraints.
driven by the sheer number and nature of the
unanswered questions in relation to potential
independence.
09ABOUT QUILTER CHEVIOT
Quilter Cheviot, which has offices in Glasgow and The company enjoys non-competing
Edinburgh, is one of the UK and Ireland’s largest relationships with independent financial
independently owned discretionary investment advisers across Scotland offering investment
firms and can trace its heritage to 1771. management solutions across a range of areas.
The firm is based in thirteen locations across Quilter Cheviot was formed last year when
Ireland, the UK and Jersey and has total investment firms Quilter and Cheviot Asset
funds under management of £15.8bn (as at 31 Management merged to create one of the largest
May 2014). independently owned providers of bespoke
investment management in the market.
Quilter Cheviot focuses primarily on structuring
and managing bespoke discretionary portfolios
for private clients, charities, trusts, pension funds
and intermediaries.
Investors should remember that the value of investments, and the income from them, can go
down as well as up. Investors may not recover what they invest.
10QUILTER CHEVIOT SCOTTISH INDEPENDENCE SURVEY
11quiltercheviot.com
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