The Tyne in Newcastle
Businesses in cities such as Newcastle fear they will miss out as Scotland is promised financial incentives to stay in union

Businesses in the northeast of England are increasingly worried that the result of the Scottish independence referendum will be indecisive, hitting the region’s economy as politicians offer sweeteners to the Scots to bolster support for the union.

One leading businessman even thinks a Yes vote could be preferable to a close No, although he wants clear-cut backing for the union to remove uncertainty.

“The nightmare scenario is a close No, which means that the [independence] debate will rumble on,” said Andrew Hodgson, chief executive of SMD, a world-leading manufacturer of remote subsea vehicles, based in Newcastle. “You will get all the problems of continued uncertainty and all the problems of Westminster trying to appease the Scots.”

Mr Hodgson, deputy chairman of the North East Local Enterprise Partnership, said northeast businesspeople he has spoken to share his view that a close No is the worst result for the region. “In some ways I would rather it’s a Yes,” he added.

Opinion polls have suggested that the substantial lead enjoyed by the No campaign has recently shrunk and that a vote against independence by a narrow margin is increasingly likely.

The twin issues of uncertainty and politicians’ promises are especially acute for the northeast. Its nearest capital city is Edinburgh, not London, it has very close links with Scotland in activities such as energy, oil and gas and it has already lost out on inward investments to Scotland’s superior funding and co-ordination. The Barnett formula, which grants Scotland more public expenditure per head than England, is another sore point.

Matt Boyle, president and chief executive of Gateshead-headquartered Sevcon, a US-listed electric vehicle specialist, said: “The absolute nightmare is a very slender No; it will continue to fester as an issue.”

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Scottish Independence

A Saltire flag
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Scotland will decide in a referendum to be held on September 18 2014 whether or not to end the 307-year-old union with England

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Consequent “devo max” incentives would, he fears, exacerbate difficulties such as recruiting skilled people. “We would have to compete with a low tax regime north of the border.” Mr Boyle, a Glaswegian, believes independence would harm Scotland but cannot vote as he lives in Northumberland.

James Ramsbotham, chief executive of the North East Chamber of Commerce, which represents 4,000 businesses, said the outcome is a great worry. “It’s a constant topic of conversation. People really perceive there are huge threats to the northeast, whichever way it goes.”

Anything that damages Scotland’s economy, such as uncertainty over the currency, would harm the northeast, he said. But so would more devolved powers to Scotland. “Because we are the ones closest, we are the ones who would suffer most.”

Already, under legislation passed in 2012, Scotland will receive new powers from 2015, including rights to borrow and to vary income tax. Also, ahead of the September 18 vote, the Conservatives, Labour and Liberal Democrats have all promised the Scots more devolved powers.

Yet, given the UK’s highly centralised system, a No vote would present an opportunity for the northeast, said Angus Armstrong, director of macroeconomic research at the National Institute of Economic and Social Research. “To make a coherent devolution strategy work, it needs to open up the question of how to devolve more powers to the English regions and the rest of the UK.” But, he warned: “It’s going to take leadership from the regions.”

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