Energy giant SSE says doubts about Scotland’s future status in Europe are creating risk and uncertainty for businesses
Alex Salmond has suffered a blow to his attempts to allay industry fears over the Scottish independence referendum after Scotland’s largest company warned that it was damaging confidence.
The energy giant SSE – which is playing a key role in the first minister’s plans to make Scotland a world leader in green energy – said on Friday that the referendum and doubts about Scotland’s future status in Europe were creating extra risk for its businesses.
In the first public concerns voiced by a major business, SSE – which employs 5,300 people in Scotland, is worth £12bn and supplies energy to 10 million customers – warned that this would affect its decisions about where and how to invest.
The company stressed that it had no opinion on whether Scotland should be independent and said it would keep its Perth headquarters, but added that if the Scottish National party won the referendum, uncertainty would continue until all negotiations to break up the UK were completed.
In a statement likely to be studied closely by the City and its shareholders, SSE said: “The forthcoming referendum increases the risk of regulatory change and legislative change with regard to the electricity and gas industry in Scotland because it means there is additional uncertainty about the future.”
The statement was seized upon by UK ministers who, until now, have been unable to back up their repeated claims that senior industrialists and companies are anxious about the referendum’s impact on businesses.
Claims late last year by the chancellor, George Osborne, that business leaders had privately warned him about those fears were rebuffed by Salmond as vague and unsubstantiated.
The first minister listed a number of major companies, including Amazon, Mitsubishi, Doosan Power Systems, Dell, Virgin Money and the Bank of New York Mellon, who had recently invested hundreds of millions of pounds in new warehouses, administration offices, research centres and renewable energy bases in Scotland.
His officials pointed out that one analysis showed foreign investment in Scotland was accelerating at the fastest rate of anywhere in the UK, and overseas firms now accounted for 31% of its economic output.
There was no response from the first minister to SSE’s statement, but Fergus Ewing, a junior energy minister, said the Scottish government welcomed the company’s contribution to the referendum consultation and its promise to keep its HQ in Perth.
He said the SNP also wanted to keep a single pan-UK energy market after independence within a unified European market. He said the “real challenge” was to ensure Scottish energy interests were not damaged, as he said they had been for years by extremely high transmission charges imposed on Scottish firms.
Ewing said: “The real challenge is ensuring that the GB market is best suited to Scottish circumstances … [We] will continue to work with SSE and other developers in Scotland to ensure that the GB-wide market is fit for purpose, just as we will continue as an EU member and be better able to fight Scotland’s corner.”
SSE’s anxieties echo warnings by the US bank Citigroup, which said in November that independence raised critical questions about public investment in green energy projects. CBI Scotland has claimed several times that many of its members are worried about the referendum, but none have been named.
SSE operates all Scotland’s major hydroelectric schemes and many major windfarms, and would be expected to play a significant role in helping an independent Scotland become the green energy powerhouse predicted by Salmond.
Michael Moore, the Scottish secretary in the UK government, said SSE’s intervention had made a “crucial point” about the impact the referendum was having on business confidence.
Moore said it lent considerable weight to his demands earlier this week for Salmond to bring forward the referendum to September 2013 rather than staging it in the autumn of 2014.
“People find it very confusing that the Scottish government want to delay an independence referendum. Scottish business finds it very unsettling,” Moore said. “This is another example that Scottish business is concerned about having a drawn-out timetable for the referendum.”
SSE said it had no proposals to change its existing investment plans but stressed that certainty about regulations, energy connections and subsidies were essential for long-term planning.
It said future investments were heavily influenced by the subsidies added to everyone’s electricity and gas bills by the UK regulator Ofgem, whose role in Scotland was now in doubt. So too was Scotland’s membership of the EU, which has a “major influence” over energy markets and systems, it said.
Johann Lamont, the Scottish Labour party leader, suggested SSE was warning that new jobs and spending could be lost. “With a national crisis in unemployment in Scotland, we cannot afford for business to shelve or delay plans to wait to see if we are remaining in the United Kingdom,” she added.
Charles Hendry, the energy minister, claims that only a UK government could provide a ‘stable’ environment to the industry
Britain’s energy minister Charles Hendry has implied that the North Sea oil industry would face greater risks and uncertainty if Scotland became independent, leaving it more vulnerable on the world stage.
In a letter to the industry trade association UK Oil & Gas, Hendry said that only the UK government could give it the influence in Europe and the “stable and consistent” regulatory and tax environment it needed.
Control over North Sea oil and gas, which is expected to generate £56bn in revenue over the next six years, will become a major battleground in the run-up to the independence referendum due to be held in autumn 2014.
Alex Salmond, Scotland’s first minister, claims Scotland would take control of 90% of North Sea fields after independence, helping it to become one of the world’s richest countries, a territorial claim disputed by the UK government.
Hendry avoided making a direct attack on Scottish independence, following a warning to ministers from David Cameron’s advisers to downplay suggestions that Scotland would be unable to survive or weaker after independence.
But in his letter to Malcolm Webb, chief executive of UK Oil & Gas, Hendry implied strongly that would expose the industry to greater risks: “I am aware that the upcoming referendum on Scottish independence is a point of uncertainty that could cause concern to your members.
“I would like to assure you that the UK government will act in the best interest of the union [between Scotland and England] by continuing to lay the foundations for a profitable future for UK continental shelf investment.”
The oil industry generally refuses to get drawn into debates about Scotland’s future, and a spokeswoman for UK Oil & Gas said it was not an issue. It remained neutral, she said.
Webb said it treated the UK and Scottish governments equally: “Oil & Gas UK is and has always been an apolitical trade association. We are committed to working with all levels of government throughout the UK and in Europe to maximise support for the UK offshore oil and gas industry.”
The latest in a number of UK ministers trying to increase their profile in Scotland, to combat Alex Salmond’s dominance of Scottish politics, Hendry will give evidence on Wednesday morning to the Scottish parliament’s economics committee.
He is also to confirm details of the 27th offshore licensing round on Wednesday, asserting that there are “many billions of barrels yet to be produced” in UK waters and a significant increase in approvals expected this year.
The UK government’s case has been damaged by the bitter row over the £2bn windfall tax that Danny Alexander, the Chief Secretary to the Treasury, imposed on the industry in March 2011 to help tackle the deficit. Alex Salmond’s government has leapt on the row, and has been pushing for Scottish parliament control over corporation tax rates, to cut them well below the UK rate of 25%.
A spokesman for John Swinney, the Scottish finance secretary, said Hendry’s remarks were “the height of hypocrisy.”
“The only uncertainty to the offshore industry has been caused by the UK Government’s smash and grab tax raid on the North Sea, costing the industry an extra £2 billion a year and threatening thousands of jobs,” he said.
Hendry tacitly admitted in his letter to Webb the industry had issues about taxation, but implied that the UK was richer and better able to use the tax regime to promote capital investment and exploit the UK’s technical expertise. “What is also critical is a fiscal regime that encourages investment and innovation, while also making a fair contribution to the public finances,” he said.
He also cited the UK government’s resistance within Europe to tougher controls on deep water drilling after the Gulf of Mexico disaster: “I would like to assure you that we are fighting hard to ensure Scotland and the rest of the UK’s interests are protected and any future measures do not undermine the hard won effectiveness of our regime.”