Should the property industry either side of the border be worried by the prospect of a rise in the Scottish National Party’s influence, particularly following its success in the general election? The party still harbours dreams of independence despite last year’s referendum. That was supposed to have settled Scotland’s political status for a generation, and with it the environment in which business operates.
But the SNP’s subsequent surge in support, and Alex Salmond declaring there will be another referendum in his lifetime, has made some nervous that another vote could come sooner. If the party retains power at the 2016 Scottish parliament elections, its intentions should be clearer.
Last year market activity slowed somewhat in the run-up to the referendum as those who could delay doing deals waited until the outcome.
But this effect should not be overplayed – Scotland’s commercial property market was pretty healthy in 2014.
According to the well-known television election commentator John Curtice, a professor at the University of Strathclyde (pictured), businesses need have little fear of the upheaval caused by another referendum – let alone independence – in the foreseeable future. Speaking before the general election, he said: “What matters is that the SNP cannot hold another referendum unless it gains another majority in the Holyrood elections 2016.”
“The SNP now appreciates that it cannot afford to lose an independence referendum twice, and it cannot win one if it again starts a long way behind. I don’t think it would want another referendum unless independence was consistently supported by about 50% in the polls.”
Asked post-election if his view had changed, he said it hadn’t. The Scottish property industry sees another referendum as a potential problem, but a fairly distant one.
Doug Smith, chairman of CBRE Scotland, says: “The prospect of another referendum is three or four steps away, so it’s not really on the agenda. People’s antennae are working, put it that way. They are aware it might come eventually.”
Smith feels that if the SNP thinks it cannot hold a referendum with a probability of winning, full fiscal autonomy for Scotland, with the country setting its own taxes and tax rates, seems instead to be the goal.
“But a lot of the assumptions [the SNP] made for that were based on an oil price that has gone down, so going forward that fiscal autonomy would look very different,” Smith says.
“I don’t think investors are worrying, though. It’s hard to see any party having an anti-business agenda in Scotland as whatever government you have needs a business community investing.”
David Davidson, managing director of Cushman & Wakefield in Scotland, says there was “considerable noise about the market being affected by the referendum, but it wasn’t. Last year’s investment volume went from £2.08bn to £3.05bn and that takes us back to 2006 levels before the recession”.
Davidson says talk of uncertainty affecting business before the referendum was more “spread south of the border for political reasons” than seen in Scotland.
He points to M&G – “a conservative investor” – having in April bought Glasgow’s Aurora office building “for £72.6m, where 55% of the income is guaranteed for only two years and the other 45% for a while longer, so they clearly feel confident. This, he says, is evidence of investors being relaxed about the political environment.
M&G declined to discuss this. But in a statement, it said: “As office supply continues to fall in Glasgow and business confidence grows, the knock-on effect for rents is attracting institutional investors looking for long-term driven returns.”
One industry figure felt things did go a bit quiet before the referendum.
“We had quite a stellar first four to five months of last year, but then it was like we hit black ice. Nobody would make an investment decision on anything – why would you when you could wait a few months and know the result for sure? That applied to investors from outside Scotland too. “Any uncertainty hits investor confidence, and the SNP is trying to keep itself relevant by talking up the idea of another referendum.”
Davidson says that part of the reason for business’s relative calm over the 2014 referendum was that until the last few weeks of the campaign “most people thought there would be a ‘no’ vote, but given the relative closeness, if there is a next time there would be concern in the market, though it’s hard to predict exactly how it would affect things”.
Scottish Property Federation director David Melhuish says it was clear last year that a number of transactions were on hold awaiting the referendum result.
He expects independence to remain the SNP’s main policy, and “I’m not sure how that will affect investment, because if deals come up that could be done, investors will not let a rival take them because they are waiting for an election result. It could be at least five years before any further referendum is held and the industry will not stop for that.”
In its general election manifesto, the SNP committed itself to promote investment and help business, such as by seeking to “seed-fund capitalisation of the Scottish Business Development Bank, enabling new investment in Scottish business growth and innovation, helping to create thousands of new jobs”. The party said it would support increased infrastructure investment and open access to finances for expanding businesses.
The SNP has surprised commentators, and perhaps itself, over the past year but the industry is relaxed about its rule in Scotland. Whether it would remain relaxed at the real prospect of independence is another matter entirely.
