Scots finance: tax divergence causing ‘acute concern’

Scottish Financial Enterprise CEO Sandy Begbie

Scottish Financial Enterprise (SFE) has published the results of a new tax and competitiveness survey that gives insight into how senior leaders in the sector see Scotland’s competitiveness.

The results show that income tax divergence is a “key concern” for the sector, with 82% of survey respondents stating that increased tax divergence with the rest of the UK is impacting their ability “to attract and retain talent in Scotland to some degree.”

This is the first time SFE has carried out a survey of its members of this kind.

SFE said: “The level of concern around attracting and retaining senior roles is acute.

“About 50% of respondents said they are ‘very concerned’ about their ability to attract or retain C-suite staff, while a further 28% are ‘concerned’.”

The survey also highlights the strong foundations of Scotland’s business environment with 45% of respondents believing Scotland performs well or very well compared to the rest of the UK.

However, some firms highlighted growing international competitiveness as a key risk, with 73% stating that Scotland performs “adequately”, “poorly” or “needs improvement” in comparison with other global financial centres.

About 66% of firms said they were aware of specific instances where Scotland’s tax and business environment had made a negative impact on investment decisions.

SFE is the representative body for Scotland’s financial services industry with over 100 member companies.

Financial services is the largest sectoral contributor to the Scottish economy, worth  9% of GVA or £14.3 billion, directly employing around 148,000 and paying well above the average salary for Scotland.

Outside of London and the South-East of England, Scotland attracts the highest level of financial services foreign direct investment.

SFE CEO Sandy Begbie said: “These survey results provide valuable insight as to how our members view the competitiveness of the Scottish financial and professional services sector.

“Whilst there is a modestly favourable view of our industry in comparison to the rest of the UK, it is clear the current policy environment, particularly in relation to tax divergence, is causing significant concern in terms of attracting and retaining people …

“Our sector growth strategy, backed by the Scottish and UK governments, underlines the opportunity to add between  £4-£7 billion to the Scottish economy over the next five years but, in order to achieve this, it is vital Scotland offers stable and consistent policy environment that encourages investment.

“Our sector is one of only a very small number that can truly deliver material economic growth over the next three to five years, and policy alignment and business environment are vital to enable the delivery of that growth.

“We operate in a global market and must be globally competitive.

“We continue to work closely with both the Scottish and UK governments and these survey results will prove useful in future discussions as we seek to achieve long-term sustainable growth that will ultimately benefit the wider economy and society.”