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Standard Life: scaremongering or just doing its job?

It was the kind of grammatical nuance that politicians use to send a subtle signal.

Standard Life chief executive David Nish insisted the firm is politically neutralPhotograph: Sam Sloan
Standard Life chief executive David Nish insisted the firm is politically neutralPhotograph: Sam Sloan

"Scotland", wrote Gerry Grimstone, chairman of Standard Life, in Thursday's 2013 Report and Accounts, "has been a good place from which to run our business and to compete around the world".

"Has been?" Not "will continue to be"? Not even "is"? For those attuned to corporate and political code, Grimstone's warning that the pensions and life insurance giant "very much hopes" - rather than "expects" - to remain in Scotland was loaded with meaning.

It was left to David Nish, Standard Life's chief executive, to insist in the same document that the company has "a long-standing policy of strict political neutrality and at no time will we advise people on how they should vote".

But for some combatants in Scotland's increasingly bitter constitutional debate, Standard Life's corporate body language, backed up by briefings that explicitly raised the prospect of moving its headquarters south, left protestations of neutrality sounding false.

Making it worse, in the same week that the 189-year-old life insurer, a poster boy for Scotland's financial industry, broke its silence on its constitutional position, a similar note of unease was sounded by Scotland's prodigal son of the financial sector.

RBS, former employer of Alex Salmond and other prominent Scottish Nationalists, warned that uncertainty surrounding the independence referendum could have "significant impact on the group's credit ratings" and EU membership status.

Although RBS chief executive Ross McEwan has declared himself relaxed about the referendum, raising the independence vote as a risk to trading performance helped to raise the temperature in the economic debate, leaving ratings agency Standard & Poor's to provide cheer to the pro-Yes side with its opinion that an independent Scotland would "benefit from all the attributes of an investment-grade sovereign credit" due to its "wealthy" economy.

Given that Standard Life's pronouncement was seized upon and wildly spun by Yes and No sides alike, it is worth looking at what the company, which has £240 billion in assets and 5000 Scottish-based employees, actually said.

Headlines notwithstanding, the company was not saying that it was preparing to move, or that all of those 5000 jobs would automatically be lost to Scotland in the event of a Yes vote.

"In view of the uncertainty that is likely to remain around [potential independence], there are steps that we can and will take now based on our own analysis.

"For example, we have started work to establish additional registered companies to operate outside Scotland, into which we could transfer parts of our operations if it was necessary to do so. This is a purely precautionary measure, and customers do not need to take any action. We are simply putting in place a mechanism which, in the event of constitutional change, allows us to provide continuity to customers and to continue serving them, wherever they live in the UK."

In other words, the company is assuring shareholders and policyholders, the vast majority of whom have no pressing interest in the referendum. It is informing them that the company's optimal management of their money will not be affected by whatever happens to its place of registration.

But given that 90% of its UK customers are outside Scotland, and the company is registered on the London Stock Exchange and regulated by UK regulators, it is hard to avoid the inference that Standard Life would prefer to avoid what it sees as the costs and complexities of an international border between 90% of its customers and their money, no matter who is responsible for erecting it.

On the record at least, the company limited itself to itemising the issues it believes could constrain its freedom to give pension-holders and shareholders their promised returns.

"At the time of publishing this report [February 2014], we believe a number of material issues remain uncertain," it says, listing these as currency, speedy accession to the EU, the shape and role of the monetary system (ie who would set interest rates and be lender of last resort), regulation and consumer protection and individual taxation, especially around savings and pensions.

For all the intemperate fury and glee with which Standard Life's comments were greeted, the truth is that the insurer - which is likely to have many pro-independence customers, shareholders and employees - was serving up ready ammunition to the No side because it felt it had to.

The Financial Reporting Council, the UK's corporate governance regulator, specifically requires that directors disclose anything that constitutes a risk.

The Scottish Government concedes that a Yes vote will lead to negotiation, which, by definition, is an uncertain process, and publicly listed companies are required to communicate and explain how this uncertainty will be mitigated.

Furious comments posted on Standard Life's Facebook page attest that this exposes the Edinburgh company to the charge of being a useful idiot of unionist propaganda. It will undoubtedly cost it some business. But to state or imply that none of the possible outcomes of the constitutional process will force the company to break its stride could expose it to worse consequences than online abuse and the loss of some customers.

"It's nonsense to say that Standard Life is being political," says Owen Kelly, chief executive of the financial industry lobby group Scottish Financial Enterprise, of which Standard Life is a leading member.

''It's misguided and wrong to say that about companies which are simply fulfilling their obligations as soundly managed companies who have to manage their business in line with customer and market expectations. They have to respond to the requirements of being a public company, which is putting the interests of shareholders first."

For some observers, however, invocations from Standard Life and its supporters of its "fiduciary duty" were just a pompous way of making life difficult for the Yes team.

Worse, they were an echo of an earlier phase of Standard Life history, back in 1992, where the company had issued dire warnings about the potential consequences of devolution (though the company was avowedly neutral by the time of the 1997 pre-devolution General Election).

Michelle Thompson, who worked for Standard Life from 1991 to 2006 in a variety of senior roles and is now a leading blogger for the pro-independence Business For Scotland group, last week recalled the "disappointment" of colleagues the last time the firm was seen to intervene in constitutional matters.

"It came as a surprise to me to hear claims that the company had made negative statements regarding independence," she wrote.

"These reports contradict what I have been told by senior contacts at Standard Life. They stress that the company - which operates in 14 countries across the world - is neutral in the independence debate. From selective quoting of the Standard Life report today you would assume otherwise."

Thompson said Standard Life was doing no more than "contingency planning - nothing more, nothing less".

"Companies do it all the time as a sensible measure to lower risks. Whether Standard Life, with 5000 employees in Scotland and a 189-year history of having its headquarters here - with the possibility of gaining business from the investment of an independent Scotland's oil fund, and of other lucrative opportunities - will actually move its headquarters elsewhere is a decision for the future. What Standard Life and other businesses deserve is for the UK Government to engage in common-sense discussions on currency, regulation and taxation in the event of independence."

Voters who notice Standard Life's comments, and those of other big businesses which are likely to be spun and counter-spun in the coming months (see panel), will choose whether or not to be influenced by them.

But future students of the 2014 independence referendum might wonder why the Scottish Government has not done more to prevent symbolic players like Standard Life serving up coded or uncoded warnings about the consequences of a Yes vote.

There are precedents for winning business hearts and minds, notably Gordon Brown and Ed Balls's "prawn-cocktail offensive" of the mid-1990s, reassuring the City prior to the 1997 Labour landslide.

But however assiduous the approaches of the Scottish Government's pro-business politicians, from Jim Mather to John Swinney to Fergus Ewing , and however influential its financial industry supporters, including such luminaries as Sir George Matthewson (former RBS chairman), Robin Angus (Personal Assets Trust) and Angus Tulloch (First State Investments), the promise of independence is one of significant change.

As the Scottish Government often states, a Yes vote will lead to a menu of new possibilities, and the choices taken cannot be assumed in advance. No-one can be too surprised if a pensions and insurance company that trades on peace of mind interprets significant change as significant risk, and covers itself accordingly.

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