In anticipation of Scotland gaining independence from the UK in September's referendum, Alliance Trust is taking steps to build a presence in England, adding to the growing business concerns over the looming vote.

In anticipation of Scotland gaining independence from the UK in September's referendum, Alliance Trust is taking steps to build a presence in England, adding to the growing business concerns over the looming vote.  

Dundee-based Alliance Trust said in its annual statement for 2013 that due to the uncertainty surrounding the referendum on Scottish independence in September, it was creating companies in England as a precautionary move.

"We have always been and continue to remain focused on the service we provide to all our shareholders and customers across the UK and beyond. 2014 is an important year for Scotland. The referendum in September is creating uncertainty for our customers and our business, which we have a responsibility to address," said Katherine Garrett-Cox, chief executive of Alliance Trust.

"Regardless of the outcome it is critical that we are able to provide continuity of service and protection for their investments and savings. To give them full confidence, we have started work to establish additional companies registered in England, in order to provide operational flexibility and to complement our existing business in Scotland," said Garrett-Cox.

Earlier this month, Standard Life warned that it might have to relocate significant operations and assets outside of the country if Scotland gains independence, and Royal Bank of Scotland has also said a yes vote could damage its credit rating.

Despite the Scottish Nationalist Party reassuring voters on the impact of breaking away from Britain, concerns remain regarding financial regulation, currency, tax and membership of the European Union.

In February, Jose Manuel Barroso, president of the European Commission, said that it would be "difficult, if not impossible" for an independent Scotland to get the necessary approval from member states to join the EU.

The three main UK political parties have also said that Scotland would be unable to keep the pound in the wake of independence. Scotland would also be forced to implement its own financial and regulatory laws, creating further red-tape for financial firms.

Uncertainty

According to Citi Research, a division of Citigroup Global Markets, with the latest polls showing 35 per cent in favour of independence and 53 per cent against, Scottish independence seems highly unlikely.

Citi also highlighted a number of concerns surrounding independence including the recent drop in oil revenues, the fiscal risks associated with its banking system and the uncertainty over currency and monetary policy.

"With the recent drop in oil revenues Scotland’s fiscal deficit is now significantly above UK levels. We estimate that Scotland’s fiscal deficit (including a geographic share of oil and gas tax revenues) has risen from 5 per cent of GDP in 2011/2012 to about 7.9 per cent of GDP in 2012/13 and about 8.3 per cent of GDP in 2013/2014. In addition, Scotland’s large banking system, with bank assets of more than 1000 per cent of Scotland’s annual GDP, creates additional fiscal risks, and might be too big to save for Scotland alone should it ever come to that," Citi said.

"There is also great uncertainty over the currency and monetary policy for an independent Scotland. The UK government has ruled out the Scottish government’s preferred option of a monetary union, and possible alternatives all have sizeable costs and risks attached," Citi added.


Annual statement

Alliance Trust Investments, the fund management business and subsidiary of Alliance Trust, reported an increase in assets under management of 16 per cent to £2.2 billion ($3.68 billion) for 2013, up from £1.9 billion in 2012.

In the annual statement from the parent company, Alliance Trust Investments posted an increase in net revenue of 142 per cent to £9.2 million, up from 3.8 per cent the previous year.

Despite an increase in assets under administration, the fund management business recorded an operating loss of £4.2 million.

Last year, Alliance Trust Investments entered a deal with Aviva Investors to engage with a team of specialist sustainable and responsible investment managers and acquired around £1.2 billion of third party assets.

"This year we have seen the positive impact of this transaction with an improved financial performance and increased assets under management. We are showing an operating loss for the year of £4.2 million compared to £6.6 million the previous year," the firm said.

Meanwhile, the parent company saw net assets increase 15.9 per cent to £2.9 million for 2013, up from £2.5 million in 2012, while net asset value total return was 18.4 per cent.

“After five years of hard work and significant change at Alliance Trust, this year we have started to reap the rewards of that change. The equity portfolio generated a gross return of over 21 per cent and Alliance Trust Savings is now profitable on an ongoing basis and will continue to benefit from changes brought about by the Retail Distribution Review. Moreover, Alliance Trust Investments has established itself as a leader in the sustainable investment sector," said Garrett-Cox.

"As a whole, the business has delivered capital growth and a significantly increased level of income and I am confident that all parts of the business are now better placed to be able to compete effectively in their respective markets and add long-term value to the group," she added.