BlackRock warns of downside to Scottish independence

In a 12-page report the asset manager outlined several potential risks to investors, savers and the country, including the fact that Scotland’s bank balance sheet would dwarf its GDP should the UK split.

BlackRock’s analysis claimed that Financial Services Compensation Scheme-eligible deposits held by Scottish firms, which would be covered by the Scottish compensation scheme in the event of independence, “would total more than 100 per cent of Scotland’s GDP,” which in 2012 was £126bn.

The report said this would represent a “significant contingent liability for the state” and added that there would be “a risk of deposit flight” from Scottish banks.

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It said this could “push the likes of RBS to move headquarters to England and establish Scotland as a subsidiary, à la Santander”, particularly in the absence of a formal currency union.

And it added: “Banks and insurers would face pressure to move headquarters to a stronger fiscal state with a more certain regulatory backdrop. Yet a wholesale exodus of staff and operations would be unlikely given Scotland’s cost advantage over London and other locations.”

BlackRock’s research suggested Scotland’s banking system would equate to about 12 times the size of its GDP, versus the UK’s five times.

UK government support to the Royal Bank of Scotland totalled £46bn in 2008/2009.

BlackRock also raised concerns for pension sponsors and trustees with schemes or schemes with contributors in both Scotland and the UK which are regulated by the Pensions Regulator and contributing to the Pension Protection Fund.

It said: “How would two regulators, two countries and a single pension protection plan work in practice? Would the remaining UK regulator be prepared to take on regulation in a country where it is not part of formal government?”

Consequently the firm advised EU cross-border schemes to “start scenario planning today” to set up separate UK and Scottish schemes “despite the costs and complexities involved”.

The report also claimed that Scotland’s lower life expectancy could lead to “postponement” of the proposal to raise the retirement age from 65 to 66.

Adviser view

Jeff Lewis, director for Edinburgh-based Robson Macintosh, said: “Most of my clients think an independent Scotland won’t happen, but that’s perhaps because they are going to vote no. I suspect independence will be more of an issue for companies than individuals.”


Scotland will go to the polls on 18 September. A yes vote would sever a 300 year-plus union, setting in motion a “complex and uncertain process” of separation and would “create risks for investors, corporations, savers” and the UK economy, according to BlackRock.

Lloyds Banking Group, Standard Life, Alliance Trust Savings, Royal Dutch Shell and Barclays have all publicly warned a Scottish yes vote would be damaging.

The yes vote crept up to around 34 per cent in early 2014 polls while the no vote stood at just under 50 per cent. The three major UK political parties are against independence.


FSCS-eligible deposits held by Scottish firms would total more than 100 per cent of Scotland’s GDP.

The nation would need to bring in new regulators, including a a new central bank, new financial services and pension regulators and new industry sector oversight mechanisms.

Costs for companies operating in both Scotland and the remaining UK would inevitably rise.

Scottish gilts would sell at higher yields, as the country would have to pay more to borrow than the UK, and it may need to accept shorter maturities.