INVESTORS in a commercial property deal have insisted on the inclusion of a clause that allows them to walk away if a second Scottish independence referendum is called.
According to a leading figure in Scotland’s property industry, this is the first such clause to directly reference the prospect of a second independence poll, but lawyers believe there could be more as uncertainty mounts over Scotland’s constitutional future.
A source with knowledge of the deal said: “We were surprised to hear it, but it is clearly a consequence of the wider debate around Brexit which in a Scottish context has led to high level discussions on indyref 2 at a political level. It’s not even as if an independence vote is certain, or how a vote like that would work.”
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An independence referendum would need sanctioned by Westminster, but the UK Government has said it would block any attempts by the SNP Government at Holyrood to hold a second vote.
The country of origin of the firm demanding the inclusion of the clause is not known, but the contract is believed to concern a development in Edinburgh.
“Clearly, this may be just one example that we’ve heard of to date and we heard a lot more in 2014 of clauses being inserted in contracts, but it is nonetheless an indication that the wider world is keeping a close eye on Scotland and the UK,” the source said.
A lawyer operating in the commercial property sector said there had been discussions relating to such clauses, and it was likely they would become more prevalent.
Property consultants fear that uncertainty over the SNP’s push for a second vote will have a further detrimental effect on the sector after the negative impact of the Brexit vote.
A Scottish Government spokesperson said: “Brexit is by far the biggest threat to Scotland’s jobs, prosperity and economy. The Prime Minister’s pursuit of a hard Brexit and the related uncertainty about an alternative to membership of the European single market – which is around eight times bigger than the UK’s alone – only increases that economic threat. In these circumstances, we are clear that independence must be an option should it become clear it is the only or best way to protect Scotland’s vital national interests.”
Scotland’s commercial property sector was last week described as having gone “on hiatus” in the immediate aftermath of the Brexit vote with the market said to have “ground to a halt” for a period as an estimated £150 million in deals were scrapped or delayed.
The source added: “There is a general malaise from investors from down south looking to invest here. The picture is very similar to before the 2014 referendum and possibly worse because there is no certainty there will be a vote; there is complete uncertainty out there and investors do not like that. If it is easier for them not to invest in Scotland then they won’t.”
Meanwhile, Miller Mathieson, executive director, Edinburgh Capital Markets at CBRE, said: “The very talk of a second independence referendum impacts investors looking at the [Scottish] market. It makes them pause and ask if there is an increased risk – you just don’t have to ask that question of somewhere like Manchester.”
Property consultant Graham Waddell, co-founder of Glasgow-based Johnston Waddell, has yet to face any enquires relating to a so-called Indyref 2 Clause, but said that it would be difficult to define.
“Because we had a definitive date in 2014, they were in a position to say ’we will buy it subject to a no vote’ and the no vote meant they were legally obliged to buy it. It was clear there was a timetable, but now I don’t how they could work in a clause; it could be called in two or three years, if at all,” said Mr Waddell.
In the run-up to the 2014 independence referendum, a proportion of investors concluding deals ahead of the September 14 vote demanded the inclusion of a so-called ‘independence clause’, which allowed them to walk away from deals in the event of a Yes vote.
While such clauses were widely reported in the weeks leading up to the 2014 vote, and ahead of the Brexit vote, the re-emergence of such demands in spite of no concrete plans, or even a proposed timetable, for a second referendum serves to illustrate the level of uncertainty in Scotland.
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“At this stage it is unusual,” said the source. “It does heighten the issues we have in making sure Scotland maintains a competitive edge and has the best possible legal and tax framework to keep attracting capital and investment in the country.
“There is a concern that people think this [vote] will automatically happen, but we just don’t know what at this stage the outcome of the Brexit negotiations are, or the discussions between the UK and Scottish governments.”
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