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12 June 2023

Why Scottish business is putting its money on Labour

After 16 years of SNP government, firms north of the border are increasingly impressed by Anas Sarwar’s party.

By Chris Deerin

The 2014 independence referendum was an arduous experience for many in Scotland’s business community. The majority – probably quite a large one – of senior figures were against the break-up of the UK, usually for pragmatic reasons. They were worried about the potentially devastating economic impact – a severe hit to GDP, a dramatic budget deficit, turmoil in the markets, and a necessity for high taxes and deep public spending cuts.

Those who dared give voice to this concern immediately found themselves subject to vitriolic abuse, and sometimes worse. Boycotts were announced by pro-independence supporters. There were angry phone calls from Alex Salmond. The message was clear: they were participants in a cynical, anti-Scottish campaign being waged by unionist forces and should shut up.

Watch: Nicola Sturgeon’s arrest is “another gift” for Labour

In the years following the referendum, many businesspeople disengaged from devolved politics. They kept their heads down and got on with the day job. In Nicola Sturgeon, Salmond’s replacement as first minister, they saw a politician who had little empathy with or interest in the fortunes of the private sector. Even if you wanted a ministerial meeting, it wasn’t always easy to get one or to feel it had been worthwhile if you did.

This was unfortunate, as it meant the economic debate north of the border became heavily dominated by left-wing voices. The argument for competitiveness and moderation was effectively ceded, income taxes rose and state intervention grew. The talk was of a well-being economy, higher government spending, and even of the evils of economic growth. There was little focus on the wealth creation and broader tax base needed to fund stronger public services.

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In recent years, business has found its voice again. A series of mismanaged SNP-Green policies – such as the deposit return scheme to disincentivise single-use bottles, the proposed ban on alcohol advertising, and the introduction of Highly Protected Marine Areas that would exclude fishing from a significant proportion of Scottish waters – combined with a growing sense of economic neglect, has demanded re-engagement with Holyrood, sometimes in robust form. Companies have warned that rising tax levels have made their task of recruiting talent from overseas more difficult. The oil and gas sector has grown increasingly concerned about the impact that hard-line Green ministers are having on energy policy.

Humza Yousaf says he is determined to mend this breach. He is aware he came close to losing the SNP leadership election to Kate Forbes, who made the economy a central plank of her manifesto and talked regularly about the need for a strong private sector and economic growth if the battle against poverty was to be won. As economy secretary, Forbes was one of the few senior figures in the SNP who engaged sympathetically with the private sector.

[See also: Does Labour have a future in Scotland?]

Yousaf’s new Economy Secretary, Neil Gray, has promised “a new approach to the government’s relationship with business… [and] to develop and agree a ‘New Deal’ with the private sector”. A group has been set up to manage relations, chaired by Gray and Poonam Malik, head of investments at the University of Strathclyde. Members include representatives of groups such as the Scottish Retail Consortium and the Scottish Tourism Alliance. One of its stated aims is to involve business at an early stage of government policy development.

A sinner repenteth and all that. Ministerial sources say that Yousaf genuinely wants to engage and is much more open-minded on policy than his predecessor was. But it is likely too little, too late.

I spend a lot of time talking and listening to Scotland’s chief executives and entrepreneurs, across all sectors. Increasingly, I find they are looking positively at the prospect of Labour governments in both London and Edinburgh. Since becoming the leader of Scottish Labour, Anas Sarwar has stressed his pro-business outlook and undertaken an energetic tour of the “rubber chicken” circuit. Those who meet him generally come away impressed.

It’s important to understand who Scotland’s business leaders are, and who they are not: they are often mischaracterised. In my experience, most are from ordinary backgrounds – self-made rather than surfing on family money and connections. They have done well for themselves and may live richly – enjoying expensive holidays and sending their children to private schools – but they have not become completely disconnected from their origins. 

Some, especially among the older cohort in the financial sector, are natural Thatcherite Conservatives and committed unionists. Many, though, are politically moderate and look back fondly on the Blair government, with its balanced view of public and private interest. More than a few have said to me that had Holyrood been better run – producing a formidable state education system, a healthy NHS and a vibrant economy – they might have been tempted to support independence, especially given the Brexit-and-Boris Johnson turmoil of recent years at Westminster. It’s still something they might consider at a future point, in the right circumstances.

In his interview with Labour’s shadow chancellor Rachel Reeves in the current New Statesman, Jason Cowley explores her theory of “securonomics”. “A Labour government,” he wrote, “would not introduce annual wealth and land taxes; raise income tax; equalise capital gains rates and income tax (something the late Nigel Lawson did as chancellor); rejoin the European single market and customs union; change the Bank of England’s inflation target and reform its rigid mandate; or take private utilities into public ownership, except for the railways.”

This will alarm the left, but is the kind of centrist pragmatism that business welcomes. Even those who regret Brexit understand that Britain’s journey back to the EU, if there is to be one, will be a process of decades. Meanwhile, Labour’s apparent U-turn on North Sea development gives the welcome impression it is listening to criticism.

Over 16 years of government, the SNP might have played its hand very differently and built broader mainstream support for independence. It chose a different path, often appealing instead to the mob, and is now paying the price as its failures in important areas, and its internal scandals, become more apparent to voters. New figures released this week by the Electoral Commission show that the nationalists received only £4,000 in donations in the first three months of this year, and that from a single donor (a James Murdoch from Strathearn), while Scottish Labour and the Liberal Democrats both attracted £200,000.

I suspect that the closer we get to next year’s general election, and the 2026 Holyrood election, the more cash Anas Sarwar will find in Labour’s coffers. Plenty of it is likely to come from a business community that is desperate for regime change at Holyrood.

[See also: Scotland won’t change until its government does]

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