Today, speaking to the BBC on BREXIT, Nicola Sturgeon, Scottish First Minister and leader of the Scottish National Party, made it clear that not only did she believe that Scotland could block BREXIT, she is prepared to give it a try!
This breaking news has given rise to the question: Could Scotland become the new voice and BFF for OFCs in Europe. For those of ya little behind on ‘urban speak’, a BFF is a ‘best friend’.
(Read here about why post BREXIT , OFCs need a new BFF.)
Before drawing such an interesting conclusion lets take a step back to the Scottish independence referendum, which propelled FM Sturgeon to possibly the most powerful person in British politics, post-BREXIT.
It is perhaps useful to recall that in the run-up to Scotland’s own ‘in or out’ vote, Scotland’s financial services industry, led the Royal Bank of Scotland made it clear that it would move to London if Scottish voters decided in favour of independence. This threat of relocation no doubt gained more than a few ‘no’ votes to Scotland’s own ‘remain’ campaign.
Having staved off one ‘exit’ referendum Scotland now faces another ‘exit’ conundrum. This time not of its own doing but as a direct result of the success of the BREXIT campaign.
Despite what FM Sturgeon has put in the public domain today why would Scotland care to ‘undo’ the BREXIT result or block its implementation?
According to the SNP leader , it is highly likely that BREXIT will trigger another Scottish independence vote since Scotland chose to ‘remain’ in Europe. Certainly it would seem worth another try to gain for Scottish sovereignty as BREXIT may well cause the Scottish ‘no’ campaign to lose a number of supports who are more concerned about ‘life outside Europe’.
Sturgeon has proved herself an astute politician and at present is quite probably the most powerful leader in Great Britain. She is also savvy enough to see the opportunity for a second round of independence debates which, with the ‘value-added’ of BREXIT, may well give rise to a good chance of an independent Scotland and the SNP leader as Madame Prime Minister.
Could London Become Scottish?
BREXIT undermines the City of London’s business model and will likely cost London not only existing clients but new ones also. Every international financial centre needs an economic hinterland; or to but it differently a market for its services. The closer and bigger the market the bigger. Another important element for the sustainable development for both ‘onshore’ and ‘offshore’ financial centres is ‘influence’ and access to international and regional policy-makers, especially in this brave new world of tax diplomacy. It is proven that even the very idea of a new international norm can cause significant disruption to IFCs and OFCs, increasing the cost of stay in business.
As is the case with trade in goods, trade in financial services success is also premised on not so much a business, regulatory and legal regime that is static but rather one that is reasonably predictable and based on the idea of certainty and sustainability. London’s IFC in a ‘solo’ Britain does not square well with the prerequisites of the City of London’s developmental model.
In the context of the ‘world turned on its head’ which for many is what the success of BREXIT means for the financial system, contemplating’the City’ as economic migrants to Edinburgh is not far-fetched at all. In any event it might be preferred to a move to independent Ireland or any other European city which would diminish the comparative and comparative advantage of City financiers working ‘offshore’ of mainland Europe. This scenario also appeals to the City’s European and international clients.
Unlike the case with the rest of Britain, if Scotland is able to negotiate some special relationship with the EU given that its ‘remain’ lobby was successful, it is possible for the City salvage something from BREXIT even if it means moving north. Indeed, Scotland may be the only game in town for the City looking for the least disruptive of options as the EU President who has made it clear that Europe no intention of allowing Britain to ‘loiter’ on the steps of Brussels. It would seem that the sooner the EU can ‘offload’ Britain and its BREXITEERS the better it will be for both economies.
That said Europe needs a nearshore Financial Centre, and preferably one where relationships can be continued with trusted, successful advisers who don’t need to be ‘schooled’ in how the City helps Europe invest abroad and at home. To describe this in terms of a very popular US sitcom, for its European clients working with the City is like the warm and fuzzy feeling the bar stool regulars at the Boston pub called ‘Cheers’expressed using the popular phrase ‘ where everybody knows your name.’
A More Likely Scenario?
It seems to me that despite the talk of Scotland blocking BREXIT, and the avalanche of constitutional motions that would cause, effectively burying Great Britain in in a still deeper sea of uncertainty on every level of governance in both the public and the private sector, it is more likely that another option is what the Scottish leader may well have in mind.
Setting aside national pride, Scotland in both Unions is by far he better option for Scotland. We know that neither London nor Edinburgh is in the least bit interested in an independent Scotland. What they are most interested in now is a way to maintain influence and contact with the EU market and decision-making in Brussels in a way that was the case with Britain ‘in Europe’. Absent that, if Scotland can fill the void left post-BREXIT’ the political dividends are much more apparent for FM Sturgeon that undoing the results of Scottish referendum and the Cameron ‘in’ or ‘out’ vote.
It is is this context that faced with an EU without Britain, if Scotland can ‘remain’ in Europe and agrees to accept the City’s economic ‘migrants’ then Scotland may well become OFCs new BFF.