Moving on or moving out

Some big Scottish finance firms put in a lot of preparation for moving HQs out of Scotland if voters had backed 'Yes' for independence.

It seems they didn't put those plans away on 19 September.

Jeremy Peat, former chief economist at Royal Bank of Scotland and much else besides, has written an academic paper arguing more effort should be put into either retaining HQs or at least high-skilled jobs.

He was in touch with representatives of major companies through the past year. And he found that every large-scale UK or internationally-focused finance firm would have moved headquarters out of Scotland if voters had chosen independence.

Presumably, that must include Aberdeen Asset Management, whose chief executive, Martin Gilbert, said he was personally relaxed about the impact of independence. In other words, Peat's message is: no, they weren't bluffing.

Now, he's telling us Scotland should become more attractive to the oft-unloved - indeed, sometimes loathed - financial sector.

Although many of the 91,000 jobs in the industry are in the lesser-skilled, lower-paid end of back office functions, a significant number are not.

Nor are they all bankers, fit only for bashing. More value is generated in Scotland from the insurance and pensions sub-sector than banking.

Resilience

It might seem like a big ask these days, but it seems we need to befriend the bonus-driven, Masarati-driving classes. That's looks particularly difficult at Holyrood, where the direction of travel for policy, using those new tax powers, is more towards closing inequality gaps than celebrating the success of big earners.

As the industry is worth nearly £20bn to the economy, with nearly 6,000 more jobs forecast by the end of 2016, and as these big salaries and bonuses ripple through the economy to support other jobs, finance shouldn't be taken for granted.

That said, this economic study suggests the multiplier effect on growth and jobs coming from finance - the measure of money circulating through repeated transactions, and the jobs it supports - may be rather lower than you'd think.

It also shows that banking has been hit less hard than was expected in 2008-09. Jeremy Peat says this reflects the "diversity, resilience and competitiveness" of financial services.

He highlights asset management as one area in which Scottish policy should focus its effort to encourage growth in handling the burgeoning assets of the world's middle classes.

Higher tax

Now, some would have you believe that the loss of headquarters would mean a mass exodus of jobs. Jeremy Peat says it ain't so.

RBS and Bank of Scotland have effectively lost their headquarters functions from Edinburgh, but are still big employers with some big salaries.

Lots of highly-skilled, highly-paid jobs don't have to be near headquarters, though they tend to be done by highly-mobile workers. There's lots of fancy IT in finance, for instance. And Mr Peat has some ideas about how to attract and retain these people.

Competitive tax rates would be a start. Much higher tax on buying a plush villa in Scotland, when compared with England, is seen by some as a signal of how things could change for high earners when income tax powers come north. Labour is making much of raising tax rates on those earning more than £150,000.

Neverendum

But let's not park the HQ question altogether, because the chief executive's office does tend to be a magnet for spending clout - not just on other senior directors, but on the legal, accounting and auditing jobs that get contracted out.

As Scotland has lost headquarters - Scottish Power, Scottish and Newcastle, Halifax Bank of Scotland, Forth Ports, the biggest distillers, Dana Petroleum, Venture Production, Amor Group, and so on (I admit, I've been on this theme before) - it's an issue that has, oddly, been largely ignored by the SNP Scottish government.

But now it could return, more aggressively. According to Jeremy Peat, we shouldn't forget the experience of Quebec.

It had referendums in 1980 and 1995, and gave us the word 'neverendum'.

It's not coincidental that 30 companies, including the Bank of Montreal, moved headquarters to Toronto between 1978 and 1981. Between 1990 and 2011, of Canada's top 500 companies, the number based in Montreal fell from 96 to 75.

The Montreal economy did not collapse. Far from it. But it moved from pre-eminent commercial centre in Canada to third position.

One difference is that language is not the issue in Scotland, whereas French-speaking was very important to the Quebec debate.

'Montreal Effect'

But there are similarities. Back in July, 'the Montreal Effect' made an appearance in Scotland's independence debate.

Professor Brad Mackay, is a Canadian at Edinburgh University Business School who has been studying Scottish business attitudes to constitutional change.

Here is what he told the Financial Times in July: "Businesses gravitate towards certainty. I think if there was a No vote and the Scottish government said, 'OK, we're now just going to get on with it,' then probably you would not get the 'Montreal effect'.

"If, on the other hand, you got a fair amount of animosity and you had the nationalists say, 'We'll give it a decade and have another go,' then I think... inevitably you would start to see some businesses move out."

And here we are.

Is moving out now inevitable, as predicted? Is it bluffing? Or is it something to be avoided? And if so, at what cost?