On 18 September, Scotland voted “no” in a referendum on whether it should be an independent country.  The UK remains intact, the financial markets responded positively, and, according to David Cameron, the Queen “purred”.  Had the Scots chosen independence, difficult issues would require addressing. Among these are what currency would an independent Scotland use?  How and when could it join the EU

One set of thorny issues has been eliminated by this vote.  However three others have emerged with resulting uncertainty for companies doing business in the UK and the EU.

The first is that any further uncertainty over Scotland’s place in the UK will damage its economy.

The “no” campaign prevailed by a material margin, (55.3% for status quo, 44.7% for independence).  But the significant increase in support for independence (which stood at 28% in April 2011) is a victory of sorts for the independence movement.  Before the polls closed, the leader of the “yes” campaign said that the referendum was a “once in a generation opportunity”. A further referendum in the medium term seems unlikely, but cannot be ruled out entirely.  Potential open-ended uncertainty has been dubbed a “neverendum”.

Quebec, like Scotland, rejected independence from Canada in 1980 and again in 1995.  However, the narrowness of the result (especially the 1995 referendum which was won by 1%) contributed to prolonged constitutional and commercial uncertainty, damaging Quebec’s economy (Montreal’s share of the top 500 Canadian companies fell from 96 in 1990 to 75 in 2011).  Similar uncertainty would damage Scotland’s economy, with businesses, most likely in the financial services industry, choosing to relocate to England.  For now at least it’s “business as usual” for some of those who had made contingency plans to move head offices from Scotland to England.  However, that could quickly change in the relatively unlikely event of a further referendum.

The second is the pressure for greater regionalization of political authority across the UK and for a new constitutional settlement. 

In many ways, political power in the UK is highly centralised; the UK’s executive branch is pooled from members of the legislature.  And while the UK has a single national parliament and government, three of its constituent nations, Scotland, Wales and Northern Ireland, have regional assemblies and executive authorities, with jurisdiction on ‘devolved’ matters.  England is the only constituent nation with no devolution from the UK parliament.  This asymmetric regional devolution raises a constitutional question: why should a Scottish MP, sitting in the UK parliament, be permitted to vote on laws that only affect England; this is known as the West Lothian question.  In the final week of the Scottish referendum campaign, and facing a possible “yes” win, the leaders of the UK’s main political parties made a joint pledge to devolve yet further powers to Scotland in the event of a “no” vote.

Scotland’s success in obtaining new powers has added impetus to the West Lothian question and led to calls, particularly from England, but also from Wales and Northern Ireland, for similar devolution from the UK Parliament.  One possible outcome to the constitutional wrangling, is an English Parliament, another is for regional English assemblies.  Big cities in Britain, particularly in the North of England, are pushing for increased autonomy.    

While the shape of the constitutional settlement is difficult to predict, further political regionalization seems likely.  With assemblies more answerable to local electorates, the UK could see increased policy divergence within its borders and become a less unitary state.  In the U.S., businesses routinely deal with overlapping and sometimes conflicting regulatory approaches taken by the federal and state governments.  In the aftermath of the vote in Scotland and the promises made by politicians to defeat independence, the UK may be headed in the same direction.

More extensive devolution to regions within the UK will add complexity to doing businesses in the UK.  Differences in legislation between the UK and its constituent parts, will need careful analysis for businesses operating across multiple constituent nations. 

The third is that while the independence vote lost in Scotland, the process by which the referendum came about (Westminster provided it) and was conducted is likely to encourage similar movements in other EU countries.  A day after Scotland’s independence poll, the Parliament of Catalonia in Spain gave its leader the power to call an independence referendum, a move that the central government in Madrid denounced as illegal.  Catalan President, Artur Mas, said Scotland’s referendum had “shown the way” for Catalonian independence.   Like Catalonia, Spain’s Basque country already has a large degree of autonomy and has unsuccessfully lobbied Madrid for a referendum on independence repeatedly for the past 15 years. Many Flemish leaders in Belgium are arguing for greater autonomy.  There is sentiment in both the Padania region and Corsica for breakaway from Italy and France, respectively.  Extra powers for Corsica were narrowly rejected in a 2003 referendum.  The potential of other referenda in the EU may mean greater uncertainty for businesses declining in the region, particularly in Spain.

In conclusion, the Scottish vote made for high drama.  The curtain has come down on this act.  Many businesses have breathed a collective sigh of relief, but uncertainties remain.