On the night of September 18, Scotland voted to remain a part of the United Kingdom. The “no” camp had maintained a safe distance ahead for most of the 18-month campaign period, but the past few weeks have seen a strong resurgence of the “yes” campaign, leaving the election night results neck-in-neck. While the margin of victory for the “no” vote was larger than almost any formal prediction, 44.3% of voters preferred to separate from the United Kingdom. Therefore, although the form of the United Kingdom will remain the same, its political status quo has changed.

Scotland will receive more powers, albeit slowly

While support for independence is likely to wane, social and political discontent will not. The Scotland Act of 2012, which will come into effect in 2015, will allow Scotland’s parliament to set income tax rates in Scotland as of 2016. The Act will also allow Scotland to take on more debt, and will give Holyrood powers over air guns, drunk driving, speed limits, and land tax, among others. However, these marginal powers are unlikely to satisfy the large proportion of Scottish voters who preferred to go it alone. The UK is likely to be pressured slowly to cede more powers to the Scottish parliament. In the event of a “yes” vote, the Scottish government had promised a corporate tax of 3% less than that in the UK. Given additional powers, the Scottish government could reduce corporate taxes in this way to attract companies to the country despite the higher income taxes on its executives.

The UK will avoid crisis, but will have a tough bargain with the EU

The Kingdom is much better off remaining United with Scotland, avoiding a currency crisis and considerable political uncertainty. However, the government will need to address the democratic deficit triggering Scotland’s referendum, or it will face reduced bargaining power when re-negotiating more sovereignty within the EU.

Other secessions are less likely to gain ground

The Scottish “no” vote will help to keep some smaller nationalist movements, such as that in Northern Italy, Transylvania (Romania), Flanders (Belgium), and Catalonia (Spain) from gaining momentum with their national governments. This in turn will help the EU to avoid a destabilizing series of political crisis.

The EU is more likely to stay together

Scotland is considerably more pro-European than its English neighbors. Only one of the country’s 59 members of parliament is conservative, making it a vital force for maintaining the UK’s EU membership. While the risk of a UK withdrawal from the EU still exists, businesses face considerably less short-term economic and financial market volatility as a result of Scotland’s “no” vote. However, the forces behind Scottish discontent — under-representation by its central government, low economic growth, growing socioeconomic differences, and high unemployment — are pervasive throughout Europe and will continue to cause considerable political uncertainty. Companies should thus be aggressively managing expectations for their Western European markets in the next 1-3 years, as Scotland’s close call is only one of many such disruptions to come.

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