REFERENDUM: The impact on Cyprus from a Scottish ‘Yes’ vote

Of interest to Cyprus, British-owned businesses and expats on the island is not so much the risk to the pound sterling, sharing of the UK’s national debt, or the distribution of North Sea oil revenues.
The impact, some say favourable, will be if the Scots vote to leave,it will spell the end to PM Cameron’s political career and the return of Labour which will campaign on a platform of higher taxes and public spending, a tougher property tax regime, hobbling and shrinking the City of London, and abolishing the concessions to foreign residents which make Britain one of the world’s most effective tax havens.
If anything, the Liberal Democrats, who would probably be Labour’s coalition partners, would be even tougher both in terms of personal tax reform and in their antagonism to the financial sector. This all spells an opportunity for Cyprus to harbour more expats or foreign high net worth individuals gradually considering abandoning the UK.
The Financial Mirror polled some of its contributors on what impact, if any, they would see from a Yes vote.

THREATS AND OPPORTUNITIES
Charis Papacharalambous, Director General of the Cyprus Investment Promotion Agency www.cipa.org.cy said that “CIPA does not have a specific rule of thumb on such issues mainly because none ever seem to be the same or carry the same repercussions.”
However, he added that “we will monitor the situation and act accordingly as there may be opportunities but also threats associated.”

FAVOURABLE RESULT
Our own economist and long-time columnist Fiona Mullen sees a Yes vote having a favourable result for us.
“If Scotland votes Yes, then it will provide an interesting opportunity for Cyprus. The general expectation is that if Scotland goes, Labour will have lost so many seats that the Conservatives will win the next general election. The Conservatives have promised an in-out referendum on EU membership if they get re-elected. Without the pro-European Scots, the vote is much more likely to be for leaving the EU than for staying.
Mullen, Director of Sapienta Economics www.sapientaeconomics.com , added that this “will leave many financial market players with a dilemma: do they stick with ‘rump’ UK, a smaller economy with uncertain, non-EU rules, or do they seek out other, English-speaking jurisdictions with an English common law system? And will they pick Ireland or Cyprus? So if there is a Yes vote on Thursday, let’s move fast to pick up that new business before the Irish do.”

DO I GET MY WHISKY?
A more level-headed Nigel Howarth of the online advice portal www.Cyprus-property-buyers.com said most of the business leaders in Scotland want the country to remain part of the UK – and some companies have said they’ll move their offices to England if Scotland does vote for independence.
“What happens if (following a ‘yes’ vote) the Scottish Government decides to raise/lower taxes on, say, cigarettes, alcohol, petrol, etc.? Will there be border crossing posts? How are they going to deal with the inevitable smuggling? Will there be border patrol ships off the coast inspecting cargo? Who’s going to pay for it all?”
“If Scotland does break away, how is Cyprus (and the rest of the EU) going to consider its citizens? As third country nationals? And what will happen to the free movement of goods? Will I still be able to get a decent bottle of Scotch in Cyprus?” asks Howarth.
“And if the rest of the rest of the UK votes to leave the EU following a referendum, will its citizens be considered as third country nationals by the Cypriot authorities? There are so many unknowns at the moment it’s difficult to see what opportunities there may be – although I’m sure that many law and accountancy firms are rubbing their hands in eager anticipation of a ‘Yes’ vote on Thursday.”

FALLING ENERGY REVENUE
Risk management expert Alan Waring, author of our RiskWatch column www.financialmirror.com/author.php?nid=19 and several books on the subject, had a more long-term impact at the back of his head, on an issue that is becoming familiar by the day to Cypriots – energy.
“A ‘Yes’ decision would be disastrous for Scotland for a long time to come and, for the remaining UK, damaging in the short term but recoverable. With my oil and gas experience, I took particular note of the almost desperate plea from Sir Ian Wood, an immensely patriotic Scot and the billionaire creator of the Wood oil and gas services group, not to destroy Scotland’s economic prosperity by voting Yes. The article about his stance by Jon Rees in the Financial Mail on Sunday (September 13) completely debunked some of the optimistic nonsense about future Scottish exploitable field reserves put about by the Yes campaigners. With the fields depleting rapidly, the projected estimate for Scotland’s annual tax revenue will have fallen to GBP 3.5 bln by 2019 or only some 10-15% of its projected public spending. Res ipsa loquitur (it speaks for itself).”
Waring added that as regards implications for Cyprus, “a Yes vote and a relatively impoverished Scottish population would see a negative impact on numbers and spending of tourists and property buyers from Scotland for possibly a generation or more. Potential capital controls in the new Scotland to prevent capital outflow and a run on the banks may limit offshore opportunities in Cyprus. However, the remainder UK with a population of some 58 mln is a large and resilient beast with a strong economy. There may be some negative short-term impact on tourism and property buying from the UK, although the latter is already at rock bottom, so we are talking about a delay in property market recovery.”