Spotlight: the thorny subject of Independence?

What does business enjoy more than most, profit? Profit? Good answer, but not quite. Actually, what business wants more than anything else is certainty and stability. Certainty and stability are the foundation of longevity and the most successful businesses rely on stability to future-proof returns.

In my native Scotland, we have a problem – the battle for another independence referendum. Now, I am not going to give you a run-down of the pros and cons of Scotland becoming an independent nation, indeed even the Scottish National Party and other pro-independence commentators are struggling to convey that to the Scottish electorate. Nor am I going to justify the mandate for another referendum.

However, what has become clear, is that the current political process of determining the future of the United Kingdom is creating uncertainty and instability for business, who are at the coal face, attempting to plan for their post-Brexit and post-pandemic future.

Since the Scottish Government announced their intention to fight for another referendum average houses prices have stagnated, while the rest of the UK enjoys bounty. In Scotland, average prices are down 1% for the first 3 months of 2021, while in England house prices have increased by 2.5% over the same period.

So, what has this process meant for our clients? For every crystal ball gazing property developer or investor, it is extremely difficult to predict the future and there are several barriers to entry as a result of the uncertainty caused by the potential of Scotland leaving the UK.

Firstly, what will happen to the Scottish property market if Scotland does leave the UK. Will the newly independent Scotland have a negative impact on the demand and supply dynamics of the property cycle? Using every factor and consideration, it is almost impossible to have a concrete answer to this question; although as indicated, uncertainty always tends to create hesitation in making decisions.

Lending and funding property transactions are a risk! If Scotland was to leave the UK, the most likely scenario is that Scotland, for the purposes of continuity, would remain under the governance of the Bank of England. However, if this wasn’t the case and Scotland adopted the ‘Scottish Pound’ – what impact would this have on interest rates and what impact would high-interest rates have on the cost of funding property transactions.

Finally, property development and investment rely on the support of real estate investment funds and private equity. These London centric funds are slowly but surely working their way up the UK, finding confidence and investing outwith the Southeast – and not a moment too soon! Nevertheless, this investment journey would be threatened by a break-up of the Union.

The 2014 independence referendum result was 55% remain to 45% leave (with an impressive turnout of 86%). Continuous badgering of Westminster for another referendum will lead to further uncertainty and put investment and development at risk. We would love to see a focus on the recovery from the Covid-19 Pandemic and less political wrangling over the state of the union. Ultimately, our clients have a hard enough time understanding the dynamics of their investment strategy, without having to stick the tail on the donkey over independence.