Leaving UK would hit Scottish financial services industry harder than Brexit, finds new report

Independence would hit Scotland’s £8bn-a-year financial services industry harder than Brexit, according to a new report.

Jeremy Peat, the former chief economist at Royal Bank of Scotland, and Owen Kelly, former head of industry body Scottish Financial Enterprise, have warned that independence would mean greater uncertainty than leaving the EU because of industry ties to the UK.

Their assessment concluded “nearly every provider of financial services in Scotland” relies heavily on UK links.

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While they acknowledged that asset and fund managers could lose out if the UK does not retain EU “passporting” rights after Brexit, their report also stated that many already have operations in other member states through which they could continue to access European markets.

Peat and Kelly said First Minister Nicolas Sturgeon was right to lobby the UK Government to keep Scotland's place in the EU single market, but added: “This line of argument does not take us to a case for Scottish independence in the EU."

“The risks to relationships for the financial sector with counterparts and customers of one type or another in the rest of the UK would intuitively appear at least as great as the risks from a hard Brexit while remaining within the UK”, they said, in a report released by consultancy Ryder.

“The uncertainties for the sector following independence look even greater than those following a sharp Brexit.”

Some figures in the industry, including Conservative MP and member of the Treasury committee Mark Garnier, had suggested in light of the June vote that it would be in Sturgeon’s interest to try to steal London’s crown, and set up Edinburgh as a major financial hub.

The First Minister has also previously warned that a “hard Brexit”, where Britain would leave the European single market, would be a major blow to the financial sector, which employs 1 in 12 of Scotland’s work force.

A Scottish government spokesperson said of the report: “It is Brexit which is far and away the biggest threat to Scotland’s economy, jobs and long-term prosperity…

“That is why we are doing everything we can to protect Scotland’s interests, and that must include the option of independence if it becomes clear it is the best or only way of doing so.”