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Scottish currency could cost local firms 1 bln pounds - study
April 3, 2014 / 10:41 AM / 4 years ago

Scottish currency could cost local firms 1 bln pounds - study

LONDON, April 3 (Reuters) - Independence could burden Scottish companies with more than 1 billion pounds ($1.66 billion) of extra costs, a report commissioned by local engineering firm Weir Group said on Thursday, adding fuel to the business case against a split.

The 80-page report researched by forecasting and analysis group Oxford Economics found a new Scottish currency could cost local businesses and households 500 million pounds a year in transaction costs with a further one-off cost of 800 million pounds for the transition.

Scotland will vote on Sept. 18 on whether it should remain part of the UK and business leaders have raised concerns over currency, tax, regulation and membership of the European Union if the country gains independence.

The potential loss of the pound is one of the biggest fears for businesses in Scotland. All three main UK political parties have ruled out a shared currency despite this being the Scottish government’s preferred option in light of a “yes” vote.

The report said a new, free-floating Scottish currency could have a more volatile exchange rate given Scotland’s dependence on oil and gas and the financial sector.

“For businesses, the conclusions seem clear: the costs of independence are guaranteed but the benefits are uncertain. That has the potential to make Scotland less competitive, not more,” Weir Chief Executive Keith Cochrane said in a statement accompanying the research.

“We believe voters deserve access to well informed analysis ahead of September’s referendum,” Cochrane said, explaining Weir’s motivation for publishing the report.

Scottish First Minister Alex Salmond says an independent Scotland would benefit as its government could take charge of its own finances, raising taxes and spending revenues from North Sea oil and gas to ensure its own prosperity. It would also, he argues, keep the pound.

The Oxford Economics report did highlight some potential benefits arising from an independent Scotland, mainly that greater policy making powers could help local businesses via a reduction of corporation tax.

But it said that “using the Scottish government’s assumptions, the payback period for this measure may be up to 15 years”.

“An independent Scotland is likely to need to tax Scottish business overall more heavily than if it remained in the UK,” the report added.

Glasgow-based Weir employs 600 people in Scotland and has its roots in manufacturing pumps for Victorian steamships. One of Scotland’s oldest and largest engineering firms, it now supplies pumps and valves for the mining, oil and gas sector.

Executives from several British companies have weighed into the Scottish independence debate, including oil majors Shell and BP and financial services firms Royal Bank of Scotland, Standard Life, and Barclays . ($1 = 0.6012 British pounds) (Editing by Tom Pfeiffer)

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