Parliamentary questions

This May, Scotland’s business community faces one of the biggest potential upheavals in its history when a new, devolved Parliament opens in Edinburgh. Scottish Engineering, which represents about 360 firms, found some wariness among members about what to

Hughes leads one of 10 ‘pathfinder’ groups set up by the Scottish Office to identify issues the Parliament could address to help industry, and to heighten awareness of the new Parliament among the Scottish business community.

For many, the main concern is not to upset Scotland’s business environment. An executive from Glasgow defence company Pilkington Optronics says: ‘Our principal concern is how seamless the transition will be. Our customer perception of Scotland as a politically stable environment is an important contributor to our marketing and selling efforts.’ The positive side is ‘that the new Parliament’s structure will allow business to get its views across both to Edinburgh and Westminster, where the real power still lies’.

Deeper concern from industry about devolution and possible independence was highlighted by a recent Mori poll. It revealed that 75% of Scotland’s 100 leading companies believed independence would be worse for business. Only 6% felt it might improve business.

A common anxiety was the threat of an added layer of red tape and bureaucracy. The new Parliament will have tax-varying powers of up to three pence in the pound on income tax and many companies fear higher taxes could drive investors out of Scotland.

The SNP, which will seek independence if it wins power in the new Parliament, dismisses the poll as scaremongering. It claims Scotland’s economy would benefit from separation: this is disputed by the other parties. The SNP claims the UK Treasury has already absorbed £80bn of Scottish oil revenues.

A spokesman for BP, whose North Sea pipelines account for 40% of UK oil production, says: ‘We will work with whatever political set-up occurs and are looking forward to continued success and a positive relationship with the new Scottish MPs.’

Leading industry figures such as Lord Simpson, chairman of GEC, which employs 6,000 in Scotland, have been forthright in their opposition to independence.

The devolved Parliament, Simpson argues, has a much better chance of creating the right business environment: ‘Separation would jeopardise the benefits of the world’s longest established single market. Business could face costs and complications arising from different tax regimes and import and export controls.’

Many are concerned about the initial instability independence could bring. According to the Scottish Office, England and the rest of the UK account for 52% of Scottish exports, representing £20bn of Scotland’s £39bn worth of exports in 1995. The rest of the UK provides 61% of total Scottish imports. Disruption to this market would have serious economic implications.

There are fears, too, about the impact of an independent Scotland adopting the euro ahead of, or after, the rest of the UK. Currency fluctuations between the euro and sterling could add to costs. According to independent trade body the Scottish Council for Development and Industry, the EU accounted for 61% of Scottish manufactured exports in 1997 up from 58% in 1996. The total value of this trade is £11.6bn, up from £10.7bn in 1996.

There are doubts about Scotland’s strength as an independent trading country in Europe. Calum McPherson, managing director of Johnstone Castings, says: ‘The UK is small enough compared to the rest of the world and to segment it further would be counterproductive.’

McPherson is in any case concerned about the devolved Parliament’s strategy on regional selective assistance grants provided by regional development funds to companies for capital expenditure. ‘In the past Scotland has been able to win more grant money than any other region. I’m concerned that this may not continue.’

According to Mori, the main concern about Europe is that an independent Scotland would be regarded as a smaller country on the fringes of another. Business will therefore invest in the rest of the UK.

The SNP disputes this. Pro-SNP group Business for Scotland claims an independent Scotland would be able to integrate more fully in the global economy. It also claims that an independent Scotland would be seventh in a list of OECD countries ranked by GDP per capita, compared with the UK’s 17th place.

Despite the debate, Scottish firms are embracing the chance to talk to government about their concerns and aims. When the 10 pathfinder groups report to Scottish industry minister Gus Macdonald at the end of this month, industry’s concerns and aspirations for the new parliament should be much clearer.

A spokesman for IBM, which employs 3,500 at its Greenock plant, says: ‘Working relationships with the present government and its agencies in Scotland are extremely good and we expect this to continue. But we are looking for the new Parliament to enhance links between government, industry and people.’