Scottish Affairs CommitteeWritten evidence submitted by Bryan Buchan, Chief Executive, Scottish Engineering

Scottish Engineering is a wholly apolitical organisation, whose primary responsibility is representation of our member companies (circa 400 at present) whose interests are certainly affected by the question of Independence.

As you know, several thousand individuals are directly employed in defence-related industries under Babcock alone; however, it should be borne in mind that those direct jobs also result in a support infrastructure which would extend that number at least two-fold.

I am not at liberty to directly quote any of the member companies; however, I can cite the example of one prominent organisation in the east of the country, which will certainly lose three of its key defence-related product lines should Independence go ahead.

Concerns have been directly related to this organisation by members across all sectors as to the uncertainty around the potential question of forthcoming Independence. Where organisations are either owned by a foreign parent or, as is the case with many, operate throughout the UK, there is reluctance to commit to either basic investment or substantial capital projects, due to the aforementioned uncertainty. The very strong message which we are receiving is that members feel many of the key questions remain unanswered, from fiscal arrangements through regulatory affairs, and indeed the budgetary process should we retain a common currency with the rest of the UK. In a recent address by Alistair Darling to the 15th Annual State of the City Economy Conference (Glasgow), he posed the question of how this would in effect be executed, ie a Scottish budget would have to be prepared for submission to Westminster for approval.

The question of EU rules on procurement would be interesting, in that we could expect an extension of the protectionist behaviours referenced in the recent Chatham House Paper on the subject. It would seem unlikely that the rump UK would offer support or opportunities to the remnants of the defence industry in Scotland.

A further concern to members was the recent indicator from the Credit Rating Agency, Fitch, that whilst the rest of the UK would retain its Triple A Credit Rating, that Scotland almost certainly would not, placing further pressure on the cost of borrowing for indigenous Scottish operations, including those in the defence sector.

Of the specific questions which you cite, we are not in a position to offer responses on the detail of the business agreements between the MoD and BAE Systems, or other specific member companies.

November 2012