Business attitudes towards Scottish independence: Evidence from small business

Brad MacKay and Sarah Ivory discuss the results of a survey conducted with the Federation of Small Businesses on the independence debate.

On September 18th, 2014, Scots will vote on whether to become an independent nation, or remain part of the United Kingdom.  As the independence debate has intensified over the past few months, the people of Scotland have been asking what such a historic choice might mean for them, their families and work. The views of those running small businesses are particularly important because small businesses make up almost 99% of all businesses in Scotland. Yet, many of the questions and views of those running small businesses have been competing with the noise of the wider economic and political independence debate.

The Federation of Small Businesses (FSB) and the University of Edinburgh Business School have come together to investigate these views and questions and, where possible, to provide some answers. Our survey involved responses from 1826 small businesses from across Scotland. It was conducted between April and May 2014. As far as we’re aware, this is the largest poll conducted of business so far.

Our survey shows that almost three quarters of Scottish businesses have been proactive about searching for information that can help to inform their decision, but they have not found information available from the political campaigns to be useful. It is, therefore, not surprising that two in five small businesses indicate that their vote could be swayed by new information in the run-up to the referendum. The research also reveals that business decisions in one and five small businesses have been influenced by the referendum debate over the past year. More than a third of respondents suggest independence would change the way they run their businesses.  

The major uncertainties facing small businesses, as reported in the survey, include the currency, tax rates, regulation, EU membership, and uncertainty during any transition period. However, small businesses also emphasised key uncertainties around very specific issues, such as how shipping through postal services might change, or how payment of VAT might work when shipping to the rUK. Half of businesses indicate independence might present opportunities, while the other half of businesses were unable to identify any opportunities independence might bring at this time.

In order of importance, the main issues in the debate for small business include the opportunities and risks for the Scottish economy, currency of an independent Scotland, business environment (e.g. taxes and regulation), personal finance (e.g. income tax and pensions), membership of the EU, future of public services (e.g. NHS, education), cross border issues (e.g. trade), energy and environment, and defence/nuclear weapons.

What is interesting about the results of this survey is that, while small businesses are more concerned about the practicalities of independence – how it might work – rather than some of the macro-economic issues, responses to the survey questions don’t differ markedly from other surveys that have focused on larger businesses. For instance, the opportunities of independence tend to relate to more access to government, or tailoring economic policy to the needs of the Scottish economy, whereas the risks tend to emphasise more specific business-related issues such as operational costs, access to customers, or the implications of independence for cross-border trade.

Again, in order of importance, the main opportunities of independence cited by small business in the survey included policies better suited to Scottish businesses, a stronger economy, lower business taxes, a stronger Scottish brand, more international opportunities, and easier access to government and politicians. As for the main risks, they included uncertainty/time to transfer to independence, a weaker economy, higher business taxes, a loss of UK/British brand and fewer international opportunities, and different tax and regulatory regimes between Scotland and the rest of the UK.

While 27% of small businesses reported that they are excited about the prospects of independence (a considerably higher percentage than previous sampling of larger businesses), 46% reported that they were not at all excited by them. Of the 1826 businesses surveyed, 54% indicated they were very concerned about the risks, and 13% said that they are not at all concerned.

As with other surveys, responses likely reflect a number of factors, including the location of trade.  Only 21% of firms have all of their customers in Scotland, and only 10% have all of their suppliers in Scotland. Of those small businesses surveyed, 45% reported that they have at least some customers in the rUK, and 43% indicated that they have at least some suppliers in the rUK. Many businesses also have at least some customers in the EU (36%) and the rest of the world (27%), and some suppliers in the EU (23%) and the rest of the world (16%).

About 18% of small business respondents in the survey suggest that the independence debate has had an impact on their business and investment decisions. Only about 1% of small businesses surveyed indicated that independence might present an opportunity for business investment and growth, whereas about 10% suggest that they could withdraw from the Scottish economy by moving the business out of Scotland, retiring or winding the business down. This is broadly consistent with other surveys that have been conducted.

The results from this survey reflect a high degree of consistency, broadly speaking, with other independent, politically-neutral interview samples and surveys. Taken together, they give a good indication of business attitudes towards independence.

Further information on the FSB/University of Edinburgh Business School survey, and for a comprehensive guide to many of the questions being posed by small businesses, and where possible, responses to them,.

Image by Mike Licht, Small Business Saturday, used with Creative Commons license.

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Brad MacKay's picture
post by Brad MacKay
University of St Andrews
10th July 2014
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