Is Standard Life alone?

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Media captionRobert Peston reports on how local people and the business world reacted

The Scottish National Party and the campaign for Scottish independence say Standard Life has - perhaps not deliberately or consciously - done them a favour, by highlighting the importance for an independent Scotland of forging a formal currency and regulatory union with the rest of the UK.

Here is John Swinney, the Scottish government's finance minister: "Standard Life's comments show exactly why our proposals for a formal currency area are the right proposals, why they are in the best interests of business on both sides of the border and why that is what will be implemented by both governments."

In other words, if only George Osborne, Ed Balls and Danny Alexander would agree to negotiate a formal currency union with an independent Scotland, everything would be tickety-boo and Standard Life would not have to emigrate south of the border.

But there of course is the rub.

If a move south by Standard Life would be bad for Scotland, it would presumably be good for England.

All those lovely, high quality finance jobs moving to London, or Bournemouth or Manchester? Yum yum, an English chancellor of the exchequer might say.

So, if anything, Standard Life may have reinforced the intransigent stance of Labour, the Tories and the Lib Dems against forming a partnership with an independent Scotland on stewardship of money and finance.

Apart from anything else, the long march south of finance would not end with Standard Life.

Here is a relevant quote from a report out today by the ratings agency Standard and Poor's: "The composition of Scotland's external balance sheet is as yet hypothetical, but our initial observation is that the Scottish financial sector is unusually large, with total assets estimated at 12.5x GDP [or more than 12 times Scotland's annual output].

"We would therefore likely view the financial sector as a significant contingent risk to the state. At the same time, a large part of this activity could be re-domiciled to the UK."

Or to put it another way, S&P thinks there is a pretty good chance that Lloyds and Royal Bank of Scotland, both of which have their legal homes in Scotland, would also relocate to England.


In the case of the big banks, it would be even more complicated and potentially nerve-racking for their customers, than for Standard Life's, if their regulator after independence was a yet-to-be created Scottish financial authority, rather than London's Prudential Regulation Authority and the Financial Conduct Authority.

How so?

Well, like Standard Life, the vast majority of their millions of UK customers are in England, Wales and Northern Ireland, not Scotland.

How would these non-Scottish depositors feel knowing that their savings would be protected by a new, yet-to-be created Scottish deposit protection scheme, rather than the existing UK scheme, the Financial Services Compensation Scheme?

Would English savers fear that the Scottish government and state might not have deep enough pockets to underwrite an effective insurance scheme for their savings?

To be clear, in an independent Scotland, English, Welsh and Northern Irish customers would be the equivalent of English customers of the Swedish bank Handelsbanken.

This statement on Handelsbanken UK's website probably says all you need to know (it says Handelsbanken's UK customers are protected by the Swedish deposit protection scheme, not the UK's).

Of course, Lloyds and RBS could pre-empt fears that a Scottish government's pockets might not be deep enough to bail them out in a crisis by creating new legal entities, or subsidiaries, into which they could inject all their English, Welsh and Northern Irish assets, liabilities and clients, so that those clients could still be protected by the current UK deposit protection arrangements (which is precisely what Standard Life says it is doing).

This would avert the need to move the home of the top company from Scotland to England.

But such rejigging of the corporate structure would be pricey and cumbersome.

So Lloyds and RBS might conclude - as Standard Life has indicated to me that it might - that it would be more efficient to move the whole shebang to London.