Keep your heart and mind in Britain

Many businesses on both sides of the border understand that Better Together means better off

Tim Wheeldon is joint managing director at Fluent Money

With Scotland now less than a week away from the referendum vote, the country has to make its final decision on where the future of its culture, identity, industry, business and finances lies.

For many Scottish voters, the prospect of operating as a politically independent entity takes precedence over many competing social and economic factors. Yet many businesses throughout the nation will be anxiously mulling the threats to Scotland’s financial stability should voters elect to separate from the UK.

The most prominent issue in the ongoing debate between the UK and Scotland has been the pound. SNP leader and first minister of Scotland Alex Salmond maintains that it can remain, while the UK government continues to remind Scottish voters that the Euro is a prerequisite for full EU membership, which the new nation will have to re-apply for.

But despite the media attention around the battle for sterling, this is just the tip of the iceberg in terms of the monumental changes to Scotland’s national and personal finances.

In particular, there is a significant threat facing its personal finance services.

Scottish lenders and brokers can expect to lose a substantial chunk of their customers should the two nations separate.

This is due to the implementation of updated FCA regulations earlier this year, which stipulates that in order for a foreign lender to gain permission for Consumer Credit Lending in the UK, they must occupy Britain ‘in heart and mind’.

If this requirement seems vague, it is deliberately so, as declining to specify what this means leaves minimum wriggle room for foreign lenders hoping to set up a UK branch.

‘Hearts and minds’ means that foreign lenders cannot lend in the UK without first satisfying the FCA that its UK-based operations are real and not simply a postal address.

If Scotland opts to leave the UK, it will be as foreign a country as France or the US, making it more challenging to establish a customer base in Britain.

Where US lenders that previously enjoyed success in the UK found themselves forced to spend on staff and premises by new FCA regulations, Scotland might now find itself in a similar predicament.

This highlights the importance of not only considering personal finance from the individual customer’s perspective, but in recognising it as a viable industry and source of employment within the Scottish economy. Much focus has been directed towards Scotland’s other thriving sectors, but with perhaps insufficient attention paid to other industries that will take a hit if the referendum vote results in a ‘Yes’ to independence.

Of course, the possibility of a separation is also undesirable for the UK personal finance sector, as British businesses similarly stand to lose a key portion of its customer base. However, the true advantage of being a ‘British’ business is the security provided by the partnership with England, Wales and Northern Ireland should the national economy come under threat.

Scotland becoming independent would also see the new nation take on its ‘fair share’ of old debt, including all of those incurred by RBS, which is not insignificant. It is therefore important when examining the perceived disadvantages of being part of a larger nation that Scotland also pays due notice to the wealth of advantages that come with being British.

Scotland provides a great deal to the UK, but so too does the UK to Scotland, which is why so many businesses on both sides of the border understand that Better Together means better off.