An audible sense of relief spread across the United Kingdom at first light on Friday morning when the hotel community, among other vested interests, learned Scottish voters rejected independence, which might have come as early as 5 May 2016.
As a reporter on hotel use, operations, investment and management, my comments will remain in that sphere. But as a Brit, the saga was otherworldly, to see perhaps something you cannot imagine altered irrevocably.
Are we back to business as usual?
The Scottish National Party, the political entity behind the defeated call for independence, said it wished to abolish or radically cut air passenger duty and consider slashing value-added tax (sales tax) on tourism, if Scotland had upped and left.
The SNP also said promotion of Brand Scotland would be better served if Scotland had more control over its purse strings.
Of these matters, and adding to them the matter of where an independent Scotland would have left investment and commercial leases, there are policy matters the U.K. government would do well right now to analyze on the back end of this tumultuous episode of British history:
Tourism taxes
The U.K. sits 139th place out of 140 measured destinations in regard to value via air passenger duty. The government in London probably believes visitors still will want to come to the U.K., usually through London, and it’s difficult to argue that anyone has been persuaded otherwise.
The U.K. introduced the ADP tax in 1994 at the rate of £5 ($8.11). It has since risen to a standard rate of £26 ($42.18) for the first band (2,000 or fewer miles from the U.K.); for all others, as of 1 April 2015, it will be £142 ($230).
For a “new” Scotland, the tax would have been an easy plus to go for, tourism being more important to Scotland’s overall economy than it is for England.
According to the U.K. principal tourism body, VisitBritain, tourism accounted in 2013 for £127 billion ($206 billion), equivalent to 9% of U.K. (including Scotland) gross domestic product. In Scotland, the government stated that the corresponding figures for it alone was £11.6 billion ($18.82 billion), equivalent to 10.3% of Scottish GDP.
With a large and loyal Scottish diaspora around the globe, it is not too farfetched to suggest that an independent Scotland would have seen incoming numbers boosted.
Investment
Much business had decided upon a wait-and-see policy in terms of where it wished to park its cash if a new Scotland had been born, but it was definitely the sentiment all through the campaign that money prefers being safe.
There would have been a sizable amount of cash leaving Scotland if the “yes” vote had won. But what currency would an independent Scotland adopt? The Bank of England was vocal that the pound sterling was not an option, while independence-minded Scottish politicians thought that when Scotland had achieved independence, the U.K.’s central bank would change its mind.
Such ambiguity never gels with business.
Also, according to business advisory CBRE, commercial leases for hotels, as well as other real estate sectors, would have been thrown into turmoil, too.
CBRE asked how the “indexation of rents would work in the event of independence. … Clearly an independent Scotland would need to publish its own measures of inflation, distinct from the rest of the U.K. For existing leases there is the risk that if payments due under them remain tied to (the) U.K. real price index then the costs of such payments could move out of line with the underlying movement in Scottish prices.”
Again, more indecision and worry; now more relief.
All the above said, last week, on the morning in which Scottish voters headed to the polls, I found the mood at the Hotel Investment Conference Europe, known as Hot.E and held in London, certainly leaning to the hope of a “no” vote but also mixed in terms of potential benefits to hotels and tourism.
For example, Richard Lewis, CEO of Best Western Great Britain, said that “our members in Scotland love what the (SNP) government there has already done in terms of tourism.”
And a few non-hotel sector tidbits to also keep in mind:
- Scotland’s largest city Glasgow voted 53.5% to 46.5% for independence; capital Edinburgh and oil-centric Aberdeen voted overwhelming “no.”
- Despite losing, the SNP will gain increased power as the elected party of the Scottish parliament, in what is known as devolution (actually, now U.K. politicians say these powers will be extended to what is being called Devo Max), including more ability to raise taxes.
- Expect England—like a wounded big cat—to lash out. Already calls abound for English regions to have the same benefits afforded to Scotland (and Wales and Northern Ireland).
- The “West Lothian Question” needs answering. What is that? It goes along the lines that why, as is the case now, should a politician in Scotland be able to vote on matters pertaining to England, but an English politician is not afforded the same opportunity on Scottish matters?
- This is probably not the last we will hear of this issue, with some wags saying it is less of a “referendum” but more of a “never-endum.”
- The U.K. remaining whole will not have its standing in the world diminished, as was feared if Scotland left.
Email Terence Baker or find him on Twitter.
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