* Finance heavyweight makes contingency plans
* RBS warns independence could impact credit ratings
* Political debate escalates in row over finance
By Belinda Goldsmith and Chris Vellacott
LONDON, Feb 27 Insurance and pensions
heavyweight Standard Life became the first major company
to warn it could move partly out of Scotland if Scots split from
the United Kingdom, fuelling a political row over the financial
impact of independence.
The company, which has been based in Scotland for 189 years,
revealed on Thursday that it had a contingency plan to partly
move from Scotland, potentially putting 5,000 jobs at risk.
In a double blow to nationalists, the Royal Bank of Scotland
also said a vote for independence would probably
significantly hit its credit ratings, impacting its costs.
Their comments come as a dispute over currency has ignited
the debate, with Scottish leader Alex Salmond wanting to share
the pound in a currency union with the rest of the United
Kingdom but the major British parties rejecting this plan.
"Standard Life and RBS's comments will have an impact on the
debate as they are totemic institutions that represent a really
important part of the Scottish economy," said Simon Clark, head
of the school of economics at the University of Edinburgh.
Scotland is home to the second largest financial services
industry in the United Kingdom, accounting for about 150,000
The Scottish government said the comments backed its
argument that a monetary union was best for businesses both
sides of the border, calling for talks with the UK government.
But the UK government, represented by Treasury Chief
Secretary Danny Alexander, said Standard Life and RBS's foray
into the ring showed the risks of independence becoming clearer.
To date few businesses have publicly stated their plans for
what they would do if Scotland voted on Sept. 18 to become
independent as the likelihood of a "Yes" vote had seemed remote.
SEPARATING BUSINESS FROM POLITICS
But with the nationalists starting to gain ground in the
polls, with about 37 percent support compared to 47 percent
opposition to independence, increasing numbers of business
leaders have started to talk about possible financial risks
while steering clear of the political bullring.
Standard Life said it was setting up registered companies in
England "as a precautionary measure" into which it could
transfer operations if Scots ended a 307-year tie to England to
ensure its competitiveness and interests of its stakeholders.
Chief Executive David Nish said this was necessary due to
uncertainty over how an independent Scotland would work, such as
its currency and if it would join the European Union.
"We have started work to establish additional registered
companies to operate outside Scotland into which we could
transfer parts of our operations if it was necessary to do so,"
said Nish, stressing the company was politically neutral.
Standard Life manages more than 244 billion pounds of assets
for its clients, around 90 percent of whom are outside Scotland.
RBS, once the world's largest bank with 12,000 staff in
Scotland, said in the risk section of its annual results on
Thursday that independence could impact its credit ratings and
the fiscal, monetary, legal and regulatory landscape.
But Chief Executive Ross McEwan said the bank had yet to
make plans for a "yes" vote, saying the company was neutral and
"won't do anything to raise the temperature of that vote".
Ratings agency Standard & Poor's said an exodus of banks
could create volatility for Scotland's liquidity and investment.
"On the other hand if this were to happen, it could bring
benefits in terms of reducing the size of the Scottish economy's
external balance sheet, normalising the size of its financial
sector, and reducing contingent liabilities," it said.
"In short, the challenge for Scotland to go it alone would
be significant, but not unsurpassable."
"RUNNING FOR COVER"
Ronnie Ludwig, a senior tax adviser in Edinburgh for
financial advisory firm Saffery Champness, said Standard Life
taking a public stand about a possible move to England was
significant and could prompt others to follow suit.
"The lack of certainty over the pound, EU membership and the
tax regime, be it corporate or personal, is driving a culture
of, at worst, fear and some are starting to run for cover,"
Ludwig told Reuters.
A poll by executive search firm Korn Ferry released this
week found 65 percent of chairmen of 32 FTSE 100 companies said
it would be bad for business if Scotland became independent.
With the row over the pound taking centre stage, Salmond has
accused the British parties of bluffing, arguing if there was a
vote for independence they would enter negotiations as a shared
currency was best for both sides. They are major trading
partners who would want to avoid currency translation costs.
Scotland's Finance Secretary John Swinney maintained the
insistence on Thursday that an independent Scotland would keep
the pound, sidestepping call for details of a Plan B.
"Scotland has a strong and diverse economy and the point of
independence is to win the powers we need to build on those
strengths and create a more prosperous and secure economy which
is good for the financial sector and everyone else," he said.
$1 = 0.6011 British pounds)