[LINK] "Banks to Distillers Weigh Cost of More Scottish Tax Powers"

[rfmcdonald]

Bloomberg's article looks at the potential economic costs of federalism, and the continued possibility of separatism, in Scotland. This sounds familiar from Canada, I have to say.

The day after Scotland voted to remain in the U.K., companies began counting the cost of staying together.

Lloyds Banking Group Plc may still consider moving south to England, according to a person familiar with the matter. Diageo Plc, the distiller that makes Scotch whisky including Johnnie Walker, said after the vote that “the future for this sector will remain bright provided there is no further regulation or taxation on the industry.”

While companies expressed relief about the outcome of the vote, they voiced uncertainty about the devolution of more tax powers to Scotland. Conservative U.K. Prime Minister David Cameron said today he will make good on pledges to give more policy-making control to Scotland, known as “Devo Max.”

Proposals outlined by Cameron on handing more power to Scotland and changing the way the U.K. Parliament functions would influence decisions made by Lloyds on where its legal headquarters should be, said the person familiar with the matter, who asked not to be named because the discussions are private. Tax rates are one factor, as is coming regulation on separating retail and investment banking, the person said.

“There is the potential for Scotland to become a relatively less attractive base for banks, so over time there could be a more subtle and less costly partial drift south,” said Ian Gordon, an analyst at Investec Ltd. in London. “Banks could conceivably consider the possibility of changing domicile when regulations are overhauled, especially when ring-fencing rules are introduced in 2019.”