Insurance powerhouses set to flee Scotland

What does today’s Scottish independence vote mean for companies in the UK?

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Standard Life, which is domiciled in Scotland, announced last week that it was looking at setting up new businesses in England to ensure the 90% of its customers who live south of the border will still have all their transactions, pensions and savings denominated in sterling.

Fellow industry giant Aviva raised some concerns for the first time earlier this week, particularly targeting insurer’s role in infrastructure investments.

"Aviva is a long-standing investor in Scottish infrastructure and we will maintain our commitment, explained Aviva CEO, Mark Wilson. “However, the cost of borrowing to fund important public infrastructure, such as schools, hospitals and roads, would almost certainly go up, to cover the increased risk of being a smaller independent country."

For the first time since the early 14th century, hostilities between Scotland and England have resumed. Although it is not William Wallace routing the English in the 1297 Battle of Stirling Bridge or Edward II being dissembled at Bannockburn in 1314, battles are being waged on the political front. 
If Scotland does become independent there could not only be serious ramifications for them and the rest of the United Kingdom, but for the global economy as a whole. 

Several leading financial powerhouses have threatened to leave Scotland if they do decide in favor of independence such as the Royal Bank of Scotland and Lloyds. As Paul Marsh of the London Business School writes:

“Re-domiciling the banks need not necessarily cut employment in Scotland. But my belief is that, over time, it would. Once a company moves its focus from one country to another, it is inevitable that the pattern of employment will eventually follow, and that more and more functions and activities would be moved ‘down south’.”

Another interesting point was raised in terms of auto insurance. UK auto insurance providers would no longer be able to serve Scottish nationals, while Scottish providers could only cover citizens under less expansive international coverages which could prove tricky for Scots who travel extensively throughout the UK. 

Now Scotland does gain from being an international center for asset management and insurance. Moreover, Scotland’s financial services sector is gigantic, with the British government estimating revenues of approximately $8 billion pounds annually ($12.9 billion). 

The trade group Scottish Financial Enterprise estimated this year that the industry, directly and indirectly, employs about 12 percent of the Scottish work force, or about 200,000 people. Insurers, banks and asset managers are also major employers in Glasgow and Edinburgh, the country’s two largest cities, according to the trade group.
 

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