Tomorrow Scots go to the polls to decide whether they should become an independent nation, ending their 307-year place within the United Kingdom. Mud has been flung on both sides and the debate has been fierce and passionate. But will a ‘yes’ vote have a great impact on Scotland’s burgeoning technology industry?
Scotland, a country of 5.3 million people in northwestern Europe, has in recent years made a name for itself in the tech sector. Big firms such as Adobe, Microsoft and Motorola have been flooding in since the 1980s, moving to a hub of factories and offices dubbed the ‘Silicon Glen’. More recently, Scottish companies have made it alongside some of the industry’s biggest names. Price comparison site Skyscanner, rumored to be on the verge of a £1 billion ($1.6 billion) IPO, 4J Studios, which made Minecraft for the XBox and Rockstar North, maker of the Grand Theft Auto games series, are all Scots brands.
Glasgow, Dundee, Fife and other cities have all contributed to the boom. But capital city Edinburgh leads the way when it comes to harnessing Scotland’s growing number of talented tech professionals. Renowned startup incubators such as CodeBase and TechCube have fostered dozens of thriving firms. A spokesperson from CodeBase declined to offer an opinion to Red Herring, but added that “one way or another it’ll be positive for us.”
Startups worry of impact on exports
One budding startup is 1partCarbon, which builds product, software and mobile financial solutions. Its CEO, Euan MacKenzie, has founded seven startups across Europe, the U.S. and Japan over 25 years. He worries that a ‘yes’ vote will negatively impact exports. In a survey conducted by ScotlandIS, the trade body for Scotland’s ICT industry, 58% of local businesses reported that they currently export, with a further 17% indicating they intend to in the future.
“We have a product line in Poland, in the E.U.,” says MacKenzie. “All of a sudden I will be subject to E.U. tariff controls. Once we’re out of the E.U., which we’re certain to be, unless we’re immediately let into the European Economic Area (EEA), I will pay tariff controls to export to the E.U., which is my biggest market.”
Others disagree. Prism Technology’s David Cairns, speaking to British broadcaster Sky News, claims that companies simply have to price abroad to avoid harm. “Anybody that (sic) is selling outside of Scotland can easily avoid any issues to do with currency whatsoever by pricing in the currency of the buying customer,” he says. “It’s something of a non-issue in that respect.”
The E.U. membership of an independent Scotland has become a political hot potato ever since the referendum was announced, with all parties involved unsure of an outcome. The E.U. leadership, as well as heads of state in countries facing similar independence rows, such as Spain and Romania, however, have voiced concern over Scottish membership. A former E.U. commissioner told The Guardian today that a ‘yes’ vote would be “very messy”.
Some Scottish National Party (SNP) politicians who are pro-independence have mooted the idea of a currency union with the rest of the U.K. (England, Wales and Northern Ireland). But this idea has been trashed by opposition politicians. And MacKenzie claims that it will impinge on lending, and investment: “Yes, there’ll be money available, but it will be from places like the Middle East or China, and it will cost us a whole lot more that the money we’re getting at the moment.”
In the ScotlandIS survey 69% of businesses believed there will be no impact on their sales following the outcome of the referendum. 22% predicted a decrease in sales. 64% would not relocate, but 36% are sufficiently concerned to consider moving in the event of a ‘yes’ vote.
ScotlandIS chief executive Polly Purvis ensured Red Herring of the group’s apolitical stance. But she claims that the IT industry could actually benefit from a split from the rest of the U.K. “As regards the business outlook, should Scotland vote for independence on Thursday in the short to medium term this is likely to create additional work for the IT sector, particularly amongst the bigger companies who will be involved in the development of stand alone systems e.g. for the equivalent of the DWP (Department for Work and Pensions), HMRC (Her Majesty’s Revenue and Customs), etc,” she says. “It is also likely to create more opportunities for smaller companies, as the Scottish Government is encouraging greater use of smaller suppliers.
“If the vote is ‘No’ this is unlikely to dampen an already buoyant market,” adds Purvis. “The IT industry in Scotland has reported year on year growth of 10%-plus over the last few years. There is an increasing focus on overseas markets, helping to fuel this growth.”
Financial services sector most concerned by yes vote
Players in the financial services sector appear set on moving wholesale upon independence, an industry which accounts for over 90,000 jobs in Scotland and represents almost 3% of its total working-age population of 3.7 million. Royal Bank of Scotland and Lloyds in particular have issued statements predicting a move south of the border, should it come into force.
Pro-yes campaigners argue that this will not have a negative effect on an independent Scotland’s economy, citing additional revenues from oil and gas and other industries. But MacKenzie believes that the tax gap left behind by fleeing finance high-earners will leave an economic hole difficult to plug. And, he adds, VCs may be put off by Scotland’s perceived isolation, which he feels would be a great shame: “I can’t speak for other tech startups but everyone thinks things are going reasonably well and we’re getting there.”
There is also the question of education. Scotland’s universities have an illustrious reputation, filling five spots of the world’s top 200 higher education facilities. This year Scotland was voted as the best place to get a higher education in the U.K., with overall satisfaction at a three-year-high of 87%. Technology has become a cornerstone of its strategy.
Scotland currently pays for the university tuition of its citizens, but students from the rest of the U.K. must pay thousands. E.U. citizens, on the other hand, are in the same category as Scots thanks to the enshrined E.U. policy of freedom of movement. Should Scotland gain independence, this could change.
“Why go to Durham or Newcastle (both in the northeast of England) and pay £9,000 ($14,700) a year when you could go to St Andrews or Edinburgh and pay nothing,” says Quintin McKellar, vice chancellor of the University of Hertfordshire, England. “Scottish universities would be swamped with highly qualified applicants from rUK (rest of the UK) reducing available places for Scottish students.”
Pro-independence groups, meanwhile, argue that the current situation can continue, citing examples from Germany and Ireland as exemptions from the rule due to ‘residence and participation’. “The biggest asset is the quality of the Scottish based workforce, supported by world class universities. This is unlikely to change,” said Purvis.
Tomorrow’s vote will have a huge impact whatever its outcome. And there’s far more to it than tech. But whether the state goes it alone or sticks to the union, technology will be playing an increasingly vital role in the Scottish economy.