Scotland has a large financial services industry.  A great many jobs in Scotland depend on it.  The problem is that, for an independent state of our scale, it would look too large for comfort.

We’ve heard the likes of Standard Life make noises about having to consider alternative arrangements, to be implemented  in the event of a Yes vote.  Comments to this effect were made in the SL annual report and it has already taken the step of setting up some English-registered companies.  Much media coverage of this.

I’ll be controversial here: I don’t think that there is anything outrageous at all about what SL has said.  Indeed, I think it has acted responsibly, as far as I can tell.

For companies such as SL, the customer base is overwhelmingly domiciled in England.  Even if an independent Scotland were a model of financial stability and rectitude, there would be an understandable nervousness in the rUK about having your savings, pension or mortgage located in a different country.  An exchange rate risk on top of that and any doubt about the status of the lender of last resort would be a marketing disaster.  The scale of the flight of capital would be breath-taking.

Unless the likes of SL are to find themselves shrinking to be domestic players only, they have to take measures that will deal with those worries.  One way of trying to do that would be to position yourself to be able to reassure customers that their investment funds will remain denominated in Sterling and will continue to fall within the remit of the rUK regulatory authorities.

For that purpose, it doesn’t really matter where the back-office administration takes place; what does count is where it is that the funds are located.  For Standard Life to think about moving its investment management to London seems a sensible precaution to take.  Indeed, even if the vote is No, it may prove necessary to do that anyway as there may be a post-referendum backlash in any event.

I say this in full knowledge of the likely impact on jobs in Edinburgh, high-calibre ones at that. It is perfectly feasible to locate the funds within rUK but to retain the investment managers here; but, the likelihood has to be that the roles would follow the money and that recruitment here would become difficult.  The scenario may sound like one of BT’s predictions of doom; the plain fact is, however, that much of that drift happened years ago, long before the current debate.

Many of our financial services “giants” are now reduced to being subsidiaries of English or non-UK companies.  Even for those institutions with investment management nominally located in Scotland, closer inspection reveals the uncomfortable truth that they have a significant presence in London.  The asset management and wholesale banking divisions of RBS are located there, for example, and not in Fred’s Folly at Gogarburn.  In reality, the powerbase is not anywhere in Edinburgh, but in Bishopsgate in London.

Now, here’s the difficult bit.  The disproportionate size of the Scottish financial sector was just about tolerable when part of a larger UK whole.  It would not be so when looked at within the context of an independent Scotland and would need to be reduced, therefore.  Ouch . . .

The collapse of RBS and BOS has been raised as a warning by BT, because Scotland on its own could not have afforded to bail them out.  That’s a combination of red herring and non sequitur: they wouldn’t have been anything like as big if they had operated solely north of the border, the toxic debts were not confined to Scotland and in any case BOS hasn’t been Scottish in any meaningful sense for a generation.  That said, we need to accept that it’s not complete bunkum, in that Scotland would need to ensure that it kept appropriate control over companies operating within its jurisdiction, which would have to include careful consideration of the potential size of liabilities in the event of difficulties.

(There’s a point to be made here about what joining the Eurozone would do to alleviate such concerns, but that’s too much of a tangent for now.  Suffice to say that it’s an option that’s been too readily dismissed so far.  Why not join the Euro?)

Sensible, clear-sighted management of the Scottish economy has to mean restoring a more normal balance to the spread across industry sectors.  Not wilfully – so, trying not to shoot yourself in the foot – but intelligently.  That means directing investment towards economic activity that will be both profitable and sustainable (not, for example, another Linwood) and ideally will help with the balance of payments.

That’s a long-term project.  Meanwhile, we have to deal with the threats to existing jobs, recognising at the same time that some triage may be unavoidable.  There may be a drift of investment management southwards unless we can offer enough of a carrot for doing otherwise (that means tax incentives).  There’s no necessity for other jobs to follow them, though there’s a danger that they will if we don’t manage to provide the reassurance that their customers will be looking for, which may well mean having to facilitate – or at least not blocking – the movement of the funds to London anyway.

When Standard Life says it needs to make contingency plans, we should be understanding of that.  Moreover, we should be helping actively to develop the thinking for companies in similar positions, not least with a view to ensuring that anything taken forward does meet the stated objective and is not part of a different agenda, unintended or otherwise.  If we don’t, it will be done anyway, but without our input.