Mark Pentecost: Exploring business issues Independence could raise for those on the English side

With the referendum on Scottish Independence rapidly approaching, I thought that it may be useful to consider briefly what some of the implications may be for businesses on the English side of the border should Scotland become independent on the proposed date of March 24, 2016.

By Mark Pentecost
Sunday, 24th August 2014, 12:52 pm
The pro-UK campaign's lead has reached a record low. Picture: Contributed
The pro-UK campaign's lead has reached a record low. Picture: Contributed

Of course there is no way in which anyone can predict with certainty what the future would hold as so much depends upon the outcome of any transitional period negotiations between the UK and Scottish governments and also on the outcome of future parliamentary elections both south and north of the border.

A central issue is what currency an Independent Scotland would have. The present position held by the Scottish government is that they will keep the pound but that will of course be subject to the agreement of the UK which does not at present look at all likely. Another option would be an independent currency perhaps pegged to the pound.

A complicating factor will be an independent Scotland’s proposed membership of the EU. All member states who have entered the EU since the Euro launched have been required to accept the Euro as part of their membership. What is unknown is whether Scotland would lose the UK’s opt-out of the Euro or whether it could negotiate an entirely new opt-out on its own behalf.

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So what would Northumberland businesses pay their Scottish employees in? Would it be pounds, euros or groats? For UK employers the ideal would be the pound, but any other outcome could mean that local businesses would have to adapt their payroll software and systems in order to pay their employees north of the border and may mean that they would have to run two separate payrolls.

Other issues for Northumberland employers would undoubtedly arise in terms of tax and pensions. Pending any tax treaty between the UK and Scotland in order to avoid double taxation in the medium to long term, then income tax, personal allowance levels, national insurance contributions as well as other taxation regimes will no doubt diverge which would double the work required in updating payroll systems. Pension legislation would also diverge upon an independent Scotland legislating independently on pensions. This would potentially put local employers in the position of having to run cross border final salary schemes, and having to deal with more complex pension provision for cross border employees.

Currently employment and health and safety law are broadly similar across the UK but the Scottish government has already committed to increase the national minimum wage and introduce a number of measures such as increasing employee protection and reviewing of zero-hours contracts. Employment law would almost certainly diverge very rapidly which means that any local businesses that carry out operations north of the border may find that they will have to keep up with not just one rapidly developing area of law but two.

Should the answer on September 18 be “Yes” then businesses will need to think about how they will respond.