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Uncertainty - the enemy of investmentSeptember 2014

Julia Evans CEO

As senior politicians of the main political parties fly north for a final push to convince the Scottish electorate on the merit of maintaining the union, it is time to consider the implications if they return to Westminster without the ‘No’ votes they need. A ‘yes’ vote for independence would not necessarily be a bad thing, it is the level of uncertainty that might cause the problem. According to a recent poll in Construction News the Construction Industry are as split on the impact as the Scottish Electorate. 51% of UK’s biggest contractors express concern that independence will impact negatively on their business, with the remaining 46% believing it will have little or no impact (3% believing there will be some benefit).

As has been witnessed through the latest difficult economic times, uncertainty makes all investors nervous. The argument for independence seems heavily based on the revenue from the oil and gas fields in the North Sea. However there are widely differing opinions between the “Yes” campaigners and the major oil companies on the size of the remaining reserves. If oil translates to money then this indicates considerable uncertainty.

There are still unanswered questions on currency for a newly independent Scotland. The Governor of the Bank of England, Mark Carney, says the idea of an independent Scotland being able to use the British pound as its currency is “incompatible with sovereignty”. Until the question of currency is resolved there will remain uncertainty.

We are seeing the major financial companies based in Scotland, like RBS and Lloyds drawing up contingency plans to move their headquarters away from Scotland if the yes vote is successful. They are not unique in the development of such plans; Sir Mike Rake the Chairman of the CBI believes that Scottish independence could have a negative impact on the economic recovery on either side of the border. Whilst pro-independence figures like Brian Souter from Stagecoach believe Scottish Independence would have a positive impact for businesses north of the border. That two such respected figures are so differing in their opinion can lead to nothing but uncertainty.

Amid the ambiguity, there is one fact that is undeniably certain, to maintain its growth and make the investment needed to continue to address the growing recovery from the recession the UK construction market needs investment and needs to have the confidence to make investment.

If there is a “No” vote will the UK construction market be impacted? There will be increased devolution, the full extent of which is yet to be identified, but it is unlikely that this will cause a high level of uncertainty amongst investors, If there is a “Yes” vote, will the UK construction market be impacted? Well, at this stage the only certainty is uncertainty.

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