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SCOTLAND VOTE

SCOTLAND VOTE AND THE UK AEROSPACE AND DEFENCE INDUSTRY – DRIVING FUTURE UNCERTAINTY
By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

14 Apr 14. It isn’t only the UK’s successful £22bn defence and aerospace industry that is hugely concerned about the possibility of YES vote emerging from September’s referendum on Scottish independence but when it comes to manufacturing jobs, the potential for instability, future investment and economic uncertainty these industries are potentially in line to be the most seriously adversely impacted. Whilst warship building remains a large part of overall defence and aerospace industrial capability in Scotland the industry is not limited to shipbuilding alone. Defence and aerospace electronics in the form of large manufacturing and service related operational investments by Raytheon, Thales UK, Selex (a division of Finmeccanica), BAE Systems, Babcock Marine, Rolls-Royce, Goodrich (a subsidiary of United Technologies), Teledyne Technologies, Spirit Aerosystems, Inter-tec plus others over many years mean that today approximately 170 defence and aerospace industry companies both large and small employ an estimated 17,000 skilled engineers and other professionals. The MoD is also a large employer in Scotland with what I would estimate to be around 17,000 people directly employed and who then support maybe as many as another 12,000 Scottish based jobs. As a useful guide I would estimate that non MoD defence and aerospace industry revenue probably generates a minimum of £3bn to the Scottish economy every year. Having invested significant sums in respective Scottish based facilities over a great many years perhaps the most important business aspects required by those that have chosen to maintain large scale manufacturing and service based defence and aerospace related manufacturing operations in Scotland is political, financial, employment and economic stability. These are in many cases highly sophisticated engineering and electronics based businesses that require a constant process of research and technology investment. What they don’t need is a period of international uncertainty or additional risks caused by domestic economic and financial uncertainty. Whilst it is certainly true that many of the international companies that have chosen to invest and build plants in Scotland have done so because of the many attractions that Scotland and its labour force has to offer the real point is that the reason they chose to do so in the first place and why they wish to retain the strong presence they have is because of what the UK is able to offer in terms of political, financial and economic stability and peace of mind. With a corporate tax system that positively encourages and incentivizes large international companies that choose to invest here the UK ‘gets it’ when it comes to attracting international investment. Would an independent Scotland be able to do the same? This begs the question of what, in the event of a ‘YES’ vote being the order of the day this September, would an independent Scotland really be able to offer businesses that have chosen to invest in Scotland? The answer is not very much when it comes to providing new incentive to invest or to retain existing operations in Scotland. Indeed, should Scotland chose the independence route its many businesses know all too well of the difficulties that would make their lives far more difficult. For instance, an independent Scotland would have neither the pound or Euro as its legal currency. Neither would it as an independent nation have any prospective or guaranteed right of entry into the European Union and it could well find itself having to wait as long as five years or more to gain EU membership. Worse perhaps is that Scotland’s economy would most likely struggle to receive sufficient levels of tax based revenues to meet its burgeoning health and welfare commitments let alone anything else. In terms of offering a stable and effectiv

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