Does the phrase ‘ambiguity aversion’ mean anything to you? If you aren’t a behavioural scientist, probably not, though you may be hearing this technical term for the human trait of disliking uncertainty quite a lot in future.
That’s because Scottish professionals from across the business spectrum are experiencing ambiguity aversion in spades, as first Brexit and then the prospect of another independence referendum (jocularly referred to locally as Indyref2) have made decision-making ever more stressful (see box).
Lab experiments from the 1960s show that individuals given the choice of an immediate painful electric shock or a less painful one at an unspecified time later that day invariably opt for the former, the outcome that brings certainty. Might the theory also hold true for Scottish independence?
“Many people in Scotland don’t want that – but if it’s going to happen, they would rather get on with it right now,” confirms Tuffin Ferraby Taylor partner Neil Wotherspoon.
Unfortunately, unlike the lab volunteers, opting for immediate independence isn’t an option for Scottish business people and could drag on almost as long as the Brexit negotiations. As Estates Gazette went to press, Scotland’s first minister Nicola Sturgeon had entered into the Brexit legal challenge fray by suggesting the Scottish Parliament should also get a say on any Brexit deal if the legal case due to be heard in the Supreme Court in early December upholds the verdict that the UK parliament must approve the triggering of Article 50, adding further uncertainty to the mix.
This posturing may play well with the Scottish public, but property professionals would rather see a sustained focus on economic development.
“In an ideal world, politicians should focus on dealing with the day-to-day issues of the country like the economy and how to stimulate growth. Unfortunately, this is not an ideal world and politics will dominate for the foreseeable future,” says David Davidson, chair of Cushman & Wakefield Scotland.
What impact could that have on Scottish property? Davidson says: “The facts are that prime yields for commercial property have risen this year [i.e. values have fallen] and the volume of deals in the market is substantially down on last year.”
So on the face of it, not good. But the mood music at recent key industry events, such as last month’s MIPIM UK in London and Expo Real in Munich, suggests that pragmatism is starting to take hold. “Forget all the flim-flam of political decisions, upheaval and changes. Whatever happens, Scotland and the UK will still be stable compared to the rest of world,” says Stephen Running, Glasgow-based entrepreneur and investment promotion manager for Scottish Cities Alliance. He reports that business people across Scotland have had enough of the ‘wait and see’ attitude that prevailed immediately after the EU referendum result.
Running adds: “There is now a strong sense that if we stop doing business here, other people will grab it from us.”
That view is reinforced by what members of the Scottish Property Federation are telling director David Melhuish. He says: “The focus is now on the day job, while the heatwave of rhetoric rolls over everybody. The only thing we can be sure of is that we will have high politics surrounding us for at least two years, so we have little choice other than to get things moving in the meantime.”
Brexit v Indyref2
“There is no doubt that a second independence referendum is causing more concern than Brexit in Scotland.
Wotherspoon suggests that the Yes voters deprived of victory in the 2014 referendum will argue that the shift in circumstances means that the public is entitled to another vote.
He adds: “Investors are concerned that independence would trigger an economic slowdown in Scotland. Nicola Sturgeon won’t call a referendum unless she knows she will win. That’s currently not the case: but only just.”
Scottish cities high up growth league
The uncertainty of Brexit and the threat of an independence referendum appear not to have dented the growth prospects of at least two Scottish cities.
Earlier this month PwC and think-tank Demos released their annual Good growth for cities report, which measures the performance of the UK’s 42 largest cities.
Of the three Scottish cities included, two made it into the top 10 highest performers: Edinburgh and Aberdeen. The latter may come as a surprise for property people who have seen values there tumble in most sectors over the last couple of years.
Although the report authors concede “Aberdeen has moved down a little and out of the top five”, the fact that the Granite City retains a significantly higher ranking than most large English cities (including London) should give those who may have been tempted to write it off as a business location pause for thought.
The other surprise performer in the report is Glasgow, which languishes in 29th place. That doesn’t mean the city is doing badly per se, but that it has made virtually no progress on tackling factors such as housing affordability, transport congestion and income inequality.
Anne Murray, inward investment manager at city council-run body Invest Glasgow, says: “Glasgow is no better or worse off than the rest of the UK. I don’t see that overseas investment from the US and elsewhere is going to change. For example, we need another 1,000 hotel bedrooms in Glasgow. There’s a very healthy return for hotel investors.”
