Standard Life threatens exodus if Scotland leaves U.K.

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In the late 1970s, when Quebec seemed on the verge of bolting from Canada, Sun Life Financial of Montreal decamped to Toronto. On Thursday, Standard Life of Edinburgh threatened to do the same if Scotland leaves the United Kingdom.

The possible exodus of Standard Life, one of Scotland's biggest players in the financial services industry, was dismissed as scare-mongering by Scottish nationalists and was exploited by British nationalists as evidence that Scotland's go-it-alone attempt, if successful, would hollow out its corporate sector.

"Independence will cost jobs," said Alistair Darling, the Edinburgh Labour MP and former chancellor of the exchequer who is chairman of the Better Together campaign, the group campaigning for a "No" vote in the September referendum on Scottish independence. "This is the reality of Scotland leaving the U.K. and losing the U.K. pound. Companies such as Standard Life rely on the strength, security and stability of the U.K."

His warning came as German Chancellor Angela Merkel made a speech before the British Parliament that urged Britain to play a central role in the European Union. She said Britain would receive no special treatment if it tries to renegotiate membership terms after the 2015 election.

While she did not mention Scotland, the implication was clear: A busted up U.K. outside on the fringes of the EU, and possibly well outside it, would lose its European voice and relevance. "We need a strong United Kingdom with a strong voice inside the EU," she said.

The warning from Standard Life, a member of the benchmark FTSE-100 index, came in the pensions and investment company's annual report. In it, chairman Gerry Grimstone said the company has been based in Scotland since 1825, has found it a good base for its global operations and did not want to leave. "But if anything were to threaten this, we will take whatever action we consider necessary – including transferring parts of our operations from Scotland – in order to ensure continuity and to protect the interests of our stakeholders."

Standard Life's chief executive officer, David Nish, said the company was already registering companies outside of Scotland as "a precautionary measure to ensure continuity of our businesses' competitive position and to protect the interests of our stakeholders."

Neither the executives of Standard Life or those of other big Scottish companies are lobbying for a "No" or "Yes" vote in the referendum – Standard Life calls itself "apolitical" – but they are clearly worried about the implications of independence, as companies in Quebec were as the province lurched from one sovereignty threat to another over the decades.

Mr. Nish said his company had questions about what currency Scotland would use, the structures of any regulatory and monetary systems (including a central bank or lack thereof), tax rates and EU inclusion, which the European Commission has said would not be automatic. Scotland's First Minister, Alex Salmond, wants an independent Scotland to be part of a currency union with England, although that too would not be automatic.

While Standard Life is not the first Scottish company to raise serious concerns about independence, it is the first big company to threaten to leave and announce precautionary measures ahead of the vote.

The fear factor began to ramp up last year when one of Scotland's biggest employers, the Weir engineering group, warned that secession talk was creating uncertainly among Scottish companies. On Wednesday, Weir CEO Keith Cochrane said the company had commissioned a report on the implications of Scottish independence, saying that "very serious questions" needed to be answered. The report is to be published in April.

Royal Bank of Scotland, like Standard Life, is taking an apolitical stance on possible Scottish independence but it also warned that secession could deliver bad economic and financial news to the group. In its annual report, RBS, which was briefly the world's largest bank before it was nearly destroyed in the 2008 financial crisis, listed a string of potential risks, "including proposed referenda on Scottish independence and U.K. membership in the EU." The bank is worried that its borrowing costs would rise if it could no longer be given the U.K.'s top-notch credit rating.

Bob Dudley, CEO of BP PLC, the former British Petroleum, warned earlier this month of "big uncertainties" facing the energy sector if Scotland were to leave the U.K. Most of Britain's oil production comes from the North Sea, off Scotland.

Some Scottish republicans dismissed Standard Life's exodus threat as fear-mongering, noting that the company had warned in 1999, when the Scottish Parliament was established, that it might move some operations to England. But it stayed put.

"Standard Life's threats are more blackmail & bullying by privileged monied elites trying to undermine Scottish democracy & social justice," Scottish writer and nationalist Kevin Williamson said in a tweet.

But the Quebec example shows that threats of a corporate exodus should be taken seriously. Sun Life's move to Toronto from Montreal in 1978 came shortly after the separatist Parti Québécois was elected and passed the French language law, known as Bill 101. Many companies, including banks and technology companies, quietly moved employees to Toronto, ensuring its status as Canada's financial and business capital.

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SCOTLAND'S SIX BIGGEST COMPANIES:

ROYAL BANK OF SCOTLAND GROUP
Head office: Edinburgh
Employees: 118,600
Business: Banking services
Market capitalization: £36.9-billion
Year founded: 1727

SSE PLC
Head office: Perth, Scotland
Employees: 19,795
Business: Electricity generator and distributor
Market capitalization: £13.8-billion
Year founded: 1998

STANDARD LIFE PLC
Head office: Edinburgh
Employees: 8,458
Business: insurance and financial services
Market capitalization: £9.1-billion
Founded: 1833

WEIR GROUP PLC
Head office: Glasgow
Employees: 13,245
Business: Engineering services provider, manufacturer
Market capitalization: £5.4-billion
Founded: 1871

AGGREKO PLC
Head office: Glasgow
Employees: 5,316
Business: Supplier of mobile power generators
Market capitalization: £4.4-billion
Year founded: 1962

CAIRN ENERGY PLC
Head office: Edinburgh
Employees: Unavailable
Business: Oil and gas exploration and development
Market capitalization: £1.1-billion
Year founded: 1980

Source: Bloomberg, company sites

Source: Bloomberg, company sites