Ai vs. legacy industry

Artificial intelligence is undoubtedly a growing segment of technology and society, but history shows that technological advances don’t eliminate the need for work, though they can shift its pattern.

This applies to agricultural production. In the UK, more than 20 per cent of the workforce was employed in the agricultural sector at the turn of the 20th century, while today, thanks to mechanisation, less than one percent work in agricultural roles. However, that small group produces vastly more food than their predecessors a century ago, which is a clear benefit to society.

Ai is likely to drive other significant productivity gains too, and that should also feed through into the cost of providing some public services. However it’s difficult to see many inroads being made into the welfare bill, particularly if fewer working hours per capita lead to the introduction of a Universal Income paid by governments to their citizens.

Taxes & a need for change

If income tax receipts should fall as automation rises, there are a number of levers governments can pull to push up tax revenues, while other existing taxes may have to pull more weight.

Consumption taxes like VAT could be hiked, and if people are working less then they may have time to consume more, which would swell coffers from this kind of taxation even without a rise in the headline rate.

Taxes on business or wealth could also enter the equation if governments find the rise of the robots opens up a black hole in their budgets.

Alternatively, new taxes may be introduced which directly tax automated production, or the gains made by owners of that production.

Indeed, the UK is now forging ahead with a digital sales tax which shows some governments are not simply going to give technology a free pass when it comes to contributing to the tax take. However, ti should be noted an alliance of Ireland, Sweden, Denmark and Germany blocked the proposal in Brussels for an EU digital sales tax on 29 November 2018.

Why Ai could spur a change in taxes

Artificial intelligence will undoubtedly deliver progress in many important areas, particularly in health care.

The accountancy firm PwC reckons that UK GDP will be around 10 per cent higher in 2030 as a result of the Ai revolution, mainly through its ability to drive consumption by the production of better and more tailored products. In the long term the impact of Ai is likely to be bigger yet, and the tax system will have to adjust accordingly.

It’s too early to call how this will happen – however, one thing we can be relatively sure of is that different models will be adopted across the globe, as political ideologies feed into the equation.

Laith Khalaf

Laith Khalaf is a senior analyst with Hargreaves Lansdown and has worked for the retail investor platform since 2001, after graduating from Cambridge University.

His research encompasses funds, markets and investment trends.

Laith is a well-known commentator and frequently features on television and radio, as well as in the national press.

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Mike Smith, the senior director of Companydebt.com and a business insolvency expert, talks to IMS StratNews:

Reverse charge measures, which were first announced in the Autumn Budget of 2017, are set to be implemented by HMRC next year, and could add to the cash-flow woes in the already struggling construction sector.

It’s estimated the changes could affect up to 150,000 construction businesses, with the end customer rather than the supplier being made responsible for certain VAT payments.

There are fears across the sector that the changes, which are an attempt to reduce the huge hole left in the public purse by ‘missing trader fraud’, could force small and medium-sized construction firms out of business and push larger operators into a state of bureaucratic limbo. 

What is missing trader fraud?

Missing trader fraud is a scam that takes place across a range of industries but that has recently taken hold in the supply chains of the construction industry. Fraudsters exploit a loophole in the UK’s complex VAT system which allows them to steal government money.

In a legitimate transaction, a subcontractor charges the contractor for the work they’ve done, plus 20 percent VAT. This VAT is then paid over to the government by the subcontractor on a quarterly basis. As a service or product moves up the supply chain, VAT is added for every new transaction and subcontractors recoup the VAT they have paid their suppliers.

Fraudsters exploit the weaknesses in this process by setting up shell companies that initially appear to operate normally, but quickly disappear without filing tax returns after they have been paid for work. The result is that the VAT owing to the exchequer is never paid over to HMRC.

Although this type of scam is relatively new in the construction industry, it is still believed that fraudsters operating in this area cost the government around £100m a year in lost VAT. That’s a small proportion of the total £13bn lost to missing trader fraud in the UK every year, but it’s still something the government is eager to stamp out.

The new reverse charge taxation system

Although the loss to the exchequer is relatively small, under the new reverse charge system, the whole of the construction industry will have to bear the brunt of the crackdown. Coming into force in October 2019, the reverse charge taxation system will cease the flow of cash between construction businesses. For every transaction that takes place, the VAT will be a paper exercise only and registered as a ‘reverse charge’ on the invoice. That means only the client-facing organisations at the top of the chain will be responsible for paying the VAT.

Understanding whether the new rules apply to a particular construction firm is relatively simple. Any company registered with the Construction Industry Scheme (CIS) will have to register a reverse charge for VAT on their invoices.

Any business that’s not CIS-registered will continue to charge VAT when the transaction takes place.

Construction firms that sell directly to domestic customers will continue to charge VAT on their products and services and will not be affected by the changes.

What are the potential implications of the new system for construction firms?

Arguably the most damaging implication for construction firms is the impact the new system will have on cash-flow. Without VAT to rely on, many businesses could struggle to make their own payments and potentially become insolvent as a result.

The new system could also create problems for the large firms at the top of the chain, as the onus will fall on them to pay over large sums of money to HMRC. That could create its own range of financial issues. The construction industry as a whole will also have to get its head around the new accounting system, which will inevitably take time and potentially cause accounting errors that could lead to unsustainable levels of debt.    

Construction firms should start preparing

For larger firms with professional tax advisors, these changes should be relatively simple to implement and absorb, but smaller subcontractors that handle their own tax obligations should start preparing now.

The risk is that subcontractors who do not educate themselves and adapt to the new system could make costly mistakes on their invoices.

If suppliers continue to charge VAT on their invoices then they will have to reverse those invoices out of their accounting system: Although that sounds like a simple process, the VAT that has been raised will automatically be owed to the state.

The consultation on the implementation of the new system concludes in October 2018. After that point, construction firms have a year to prepare before the changes are made.  

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Mario d’Aragona is the Managing Partner at TML Venture Ltd and supports companies in finding tailor-made investment solutions. His industry focus is on renewable technology, energy and food companies.

He is a seasoned finance executive who serves as CFO for fire & security, food, energy and clean-tech global companies; has ‘turn-around’ experience and has been involved in the management of re-financing growing businesses:  TML Venture Ltd supports companies in finding tailor-made investment solutions.

• Quill Narrative Science’s technology which provides automated written articles
• Amazon’s and Netflix’s capability to generate automated book and movie recommendations
• Workfusion’s provision of RPA (Robotic Processes Automation)
• Computerised unsupervised Algorithms like blockchain
• Watson – the ‘cognitive’ computing analytics provider for the trading floor,

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In its Global Enforcement Review, complied for the financial services industry, the regulatory advisor presents analysis highlighting that the degree penalty amounts against individuals have dropped to new lows.

The 2018 review, a long-running annual report which is now in its fifth year, states that between 2016–2017, the  fall in UK penalty amounts against individuals can be attributed to global financial regulators switching their focus from imposing large fines against firms to making individuals more accountable; pushing those individuals to improve their ability to detect misconduct earlier through both data and technology.

Takeaways

• UK penalty amounts against individuals dropped from £18.8m to £970,000 from 2016 to 2017, its lowest since the financial crisis.
• U.S., European (excluding UK) and Hong Kong penalty amounts against individuals rose over the same period.
• Hong Kong, Singapore and Australia had a greater proportion of their total penalty amounts against individuals than northern hemisphere markets from 2013-2017.

Regulatory risk insights on global & UK penalty levels

Duff & Phelps’ analysis of large enforcement cases, which has been collated by Corlytics – a global provider of insight analysis into regulatory risk –  shows total penalty amounts globally climbed 30% between 2015 and 2017 to 26.5 bln usd.

However, total penalty amounts globally are forecast to be lower this year (2018), reaching just 8.1 bln usd in the first six months of 2018 compared to 18.35 bln over the same period in 2017.

The data shows this decline is particularly evident in the U.S., UK and Europe.

Of the total global penalties in 2017, the U.S. remains the dominant force, levying penalties accounting for 94% (24.4 bln) of the global total against firms and 99% (621.3 mln) individual penalties: In the U.S., total penalty amounts against firms and individuals rose by 2% and 23% respectively from 2016 to 2017.

UK individual penalties

Total UK individual penalties rose markedly to 866 mln stg in 2017 from 71 mln stg in 2016, though this can be explained in part by two large penalties issued separately by the Serious Fraud Office (SFO) and the Financial Conduct Authority (FCA) totalling 673.3 mln stg, Duff & Phelps’ data shows.

However, UK individual penalties dropped significantly from 18.8 mln stg to £970,000 over the same period; the lowest amount on record since the financial crisis in 2008, the data shows.

In line with the global picture, total penalty amounts in the UK are forecast to be lower this year, having reached just 175 mln stg in the first six months of 2018.

With the introduction of the Senior Managers and Certification Regime (SM&CR) for banks in 2016, which is being rolled out to all firms by December 2019, enforcement cases and penalties against individuals can reasonably be expected to rise in the UK over the next few years, according to Duff & Phelps.

Importantly, individuals holding senior management positions within the banking sector should note, the FCA published changes to the SM&CR (effective from 4 July 2018), stating:

‘The most senior people (‘senior managers’) performing key roles (‘senior management functions’) need FCA approval before starting their roles’.

Individual penalties in Europe excluding the UK

In Europe (excluding the UK), total penalty amounts from enforcement action against firms fell significantly, from 527.5 mln eur in 2016 to 109 mln eur in 2017 – however, it should be noted the 2016 total is skewed by three large benchmark cases totalling 485 mln eur.  

According to the data, activity in Europe has been bolstered by more active enforcement from regulators such as the European Commission, Central Bank of Ireland and France’s Autorité des Marchés Financiers.

Penalty amounts against individuals in Europe, whilst still modest, grew from 1.6 mln eur in 2016 to 2.9 mln eur in 2017.

Globally, according to the data, the trend from 2013 to 2017 shows on average a notably larger proportion of total penalty amounts being levied against individuals in southern hemispheres compared to northern hemisphere jurisdictions: Hong Kong (34%), Singapore (62%) and Australia (32%) – all recorded higher proportions than the United States (2%), UK (7%) and Europe (1%).

What the expert says

Managing Director of Regulatory and Compliance Consulting at Duff & Phelps, Nick Bayley, commented for IMS StratNews on the findings:

“Massive fines on firms have lost their power to shock, not just in the industry but also among the public. The declining penalty amounts from previous years in the UK point to the end of the big benchmark manipulation cases – but also potentially suggests a change in regulators’ enforcement approach and their faith in the ability of big fines alone to change culture: Regulators globally are also using a wider range of enforcement tools in an attempt to improve conduct.

Specifically on UK individual penalties …

“The UK regulators have led the way in promoting the importance of individual accountability through the SM(&)CR, something which has been subsequently mirrored in Australia (‘BEAR’), Hong Kong (‘MIC’) and Singapore (‘Individual Accountability and Conduct’).  As a result, we can expect the FCA to increasingly focus on enforcement action against individuals, as it seeks to make the new regime bare its teeth. However, as the majority of UK financial services firms will not be in scope of the SM(&)CR until 2019, combined with the time for regulators to investigate and conclude cases, we expect it could be up to three years before a significant increase in penalties against individuals start[s] to come through.

And his wider view …

“While regulators are revising and updating their priorities, we saw the potential for unforeseen issues such as the LIBOR and FX cases to arise or new market developments and risks [to] emerge, which inevitably will shift regulators’ attention and their resources.

“Regulators globally are investing in their technology capabilities, which in conjunction with more granular regulatory reporting, should enable them to detect misconduct more quickly and [make] greater use of early intervention and disruption techniques,” Nick Bayley concludes.

More about Duff & Phelps

Duff & Phelps is a global advisor that aims to protect, restore and maximise value for clients in the areas of valuation, corporate finance, investigations, disputes; cyber security, compliance and regulatory matters, and other governance-related issues. The firms works with clients across diverse sectors, focused on mitigating risk to assets, operations and people.

Following its acquisition of Kroll, a division of Duff & Phelps since 2018, the firm has has expanded its work force to include nearly 3,500 professionals in 28 countries around the world, it reported. For more information, visit www.duffandphelps.com.

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The firm is an exciting automated smart business current account, built for the unique needs of freelancers and self-employed people.

It offers this group the accounting tools they need to manage taxes, stay on top of expenses and get paid on-time! 

The app-based company’s smart current account combines banking, accounting and tax services designed specifically for this area of the UK’s fast-growing workforce, including the so-called ‘gig economy‘.

Coconut launched its iPhone app for sole traders on 31 January 2018, and has since opened 2,500 current accounts with £10 mln payments processed.

In September 2018 it also pre-approved its first Android customer, and says it continues to build features to support sole traders; in addition, it is developing tools aimed at including in the future limited company contractors.

The company is backed by leading tech accelerator, Techstars, and is one of the ten winners of the Nesta Open Up Challenge; a competition which awards prizes to innovative businesses using new Open Banking APIs.

Who is Elaine Clark?

Elaine Clark created the Cheapaccounting.co.uk franchise, which was established to make small business accounting as efficient and cost effective as possible.

Coconut says she brings a wide range of experience to the firm, which will help it build additional tools perfectly suited for those accountants who support these customers.

Elaine Clark tells IMS StratNews:  “I’m really excited to be working with the Coconut team, as they build out the accountancy offering of their product.

“I think the convergence of banking and accounting will be more transformative than cloud accounting was 10 years ago; we want accountants to be able to harness the full potential of technologies like machine learning, to enable them to better service their clients – while also improving margins and allowing them to grow their practices.

“Coconut will soon allow them to do this in a single tailored product.”

Clark also adds that Coconut is building a community of accountants in a Facebook group called Coconut Partners: “In the same way that customers have been a driving force in the development of features, they aim to do the same with the accounting community”, she says.

What Coconut says

Sam O’Connor, co-founder and CEO at Coconut, says, “Coconut is bringing banking and accounting together to eliminate business admin for self-employed people and small business owners. But we want the accountants our customers work with to also benefit from real-time bookkeeping and rich data, because this saves everyone time and money.

“Ninety percent of businesses in the UK are owner managed and 90% of the growth in small companies since 2001 are non-employers.

“These businesses tend to have simpler requirements than bigger businesses, but the products out there are complicated and dated, so haven’t kept up with the shift in the market.

“We think that these businesses, and the accountants that support them, need access to the most advanced technologies, and Coconut will provide this in a tailored product.”

By Ingrid Smith, Inhouse Editor

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SMEs: New Legislation

The UK Government has decided to introduce laws that will support small businesses (SMEs) in their efforts to retrieve money from unpaid invoices.

Previous unfair contracts prevented small suppliers from accessing invoice finance; unbalanced contracts with larger companies prevented many SMEs from securing invoice finance from providers such as banks and other investors.

The new regulations were put to Parliament on 10 September, 2018, and are set to facilitate a £1 billion long-term boost to the economy, says the Department for Business, Energy and Industrial Strategy.

How it works

The laws form part of the Government’s modern Industrial Strategy, and are designed to build an environment where small businesses are better able to thrive. They will ensure that any contractual restrictions entered into after 31 December 2018, (with certain exceptions), can be disregarded by small businesses and finance providers, effectively preventing larger businesses from abusing their market position.

The exceptions relate to contracts for financial services; those agreed with consumers or those connected to the sale of a business.

The value of invoice finance is obvious: it allows a business to raise funds by assigning their right to be paid ‘receivables’ to a finance provider in exchange for funds – which is typically around 80 per cent of the value of the invoices.

The ‘advance’ is obtained within days, as opposed to weeks, allowing a small company to manage turnover without tipping into the red. The remaining 20 per cent (minus fees and charges) is then paid when the customer settles the invoice.

It’s important to note that Invoice finance is not borrowing; the supplier receives what is effectively an advance against a future payment.

This legislation addresses anomalies relating to purchase contracts that include terms preventing access to invoice finance. This is mainly due to suppliers’ lack of foresight, where they have negotiated poorly, ultimately leaving them in a weak contractual position.

The new laws will address these detrimental contract terms. 

Expert views

Small Business Minister, Kelly Tolhurst, says: “These new laws will give small businesses more access to the finance they need to succeed and will help ensure they have a level playing field from which to set fair contracts with the businesses they supply.

“The proposed laws come as a number of larger businesses stop their suppliers from assigning ‘receivables’ – the right to receive the proceeds from an invoice. This assignment is essential for invoice finance to operate.”

She states that restrictive contract terms are too often used by larger businesses to maintain a hold over their suppliers. Small suppliers then find themselves unable to negotiate changes to a proposed contract because of their lack of power in the marketplace, Tolhurst argues.

The minister views the UK’s 5.7 million small businesses as the backbone of the UK’s economy, “and central to our modern Industrial Strategy”, with more than 1,000 starting up every day.

CEO of the innovation tax specialist GovGrant, Luke Hamm, which has a spotlight interest on research and development, says he welcomes the revised regulations.

Hamm states, “We hear regularly from smaller suppliers who are tied into restrictive contracts with larger players, for example in the supermarket sector, and it is extremely difficult for them to negotiate changes in contractual terms.

The CEO has urged the Chancellor of the Exchequer, Philip Hammond, to prioritise small business in November’s forthcoming Budget, citing innovation and R&D as a policy areas that seriously require a boost.

Hamm says, “We need to prioritise innovation and industrial strategy … As the announcement on invoice finance shows, the government’s industrial strategy has its heart in the right place, but it’s still unambitious, and needs more imagination and drive.

“Aiming for 2.4 per cent of GDP invested in R&D by 2027 is mediocre; that’s where Germany is today.

“We’d also like to see more help for the smallest companies, where they are scaling up but opt not to draw market salaries. The scheme doesn’t allow for that.”

Hamm also highlights the importance of the forthcoming annual HMRC report on R&D tax credit statistics, which he argues will provide an important snapshot of just how widely the UK’s innovative companies, including SMEs, are making use of the government’s tax credit system.

by Ingrid Smith

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Along with Juan Carlos Torres, investor and chairman of the travel retail group, Dufry, the investment agreement aims at supporting the development of Italian firm Moncler SpA into potentially one of the world’s leading luxury groups.

The two long-term orientated investors acquired their stake in the Italian/French luxury company – seller of high-end outerwear and apparel – via the newly incorporated investment company from Ruffini Partecipazioni called Newco.

Following the exit of Clubsette, Newco will hold a 26.8 percent stake in Moncler.

Clubsette S.r.l. (an investment vehicle controlled by Tamburi Investment Partners) currently owns 14 percent of the corporate capital of Ruffini Partecipazioni. Once Clubsette exits Ruffini Partecipazioni it will receive a 5.1 percent direct equity holding in Moncler, as reimbursement and liquidation of its original.

Chairman and CEO of Moncler, Remo Ruffini, will remain the single largest and controlling quotaholder of Newco – through Ruffini Partecipazioni – and will continue to define and drive Moncler’s plans for future development, the investment company said.

The investment agreement is expected to be effective from 3 August 2016 and includes a shareholders’ agreement to be executed on that closing date by Ruffini Partecipazioni and the Investors as quotaholders of Newco.

Speaking on the acquisition, Head of Europe for Temasek, Tan Chong Lee, said:

“This investment represents Temasek’s largest commitment to an Italian company to date. Italy is home to leading consumer and industrial businesses that [has] considerable export and international growth potential.”

While having been established in Grenoble, France, in 1952, Moncler operates in over 70 countries throughout Italy, EMEA, Asia and the Americas; through a network of mono-brand stores and major exclusive luxury department and multi-brand stores.

Senior Managing Director for Europe and Joint Head of Consumer at Temasek, Luigi Feola said:

“We are pleased to gain exposure to Moncler… We welcome the opportunity to work alongside our partner Remo Ruffini and to support Moncler in the long term as it continues its global expansion.”

Temasek added that it sees opportunities in leading European companies looking to expand and diversify their export markets to growth economies in Asia, Africa and Latin America – unsurprisingly, including those consumer companies where there’s strong appeal around their brands in markets such as China.

Commenting on the new partnership Remo Ruffini said:

“In Temasek and Juan Carlos I have found what I have been seeking as I look toward the future phases of Moncler’s development: committed, supportive, knowledgeable and ambitious strategic partners… they also have strong economic alignment of interest with all of Moncler’s institutional and individual shareholders.” 

The company invests over the long term around the following four key investment themes: growing middle income populations, transforming economies, deepening comparative advantages and emerging champions.

Temasek argues that, by investing in companies that cater to one or more of these themes, it has become a provider of capital that can help companies, at various inflection points of growth, to meet the challenges aligned with its investment themes. It added that the themes also reflect its perspectives on long term trends.

Temasek was incorporated in 1974and has a S$242 bln (Sd) (180 bln usd; 158 bln eur; HK$1.40 trillion (HKd); 125 bln gbp) portfolio at 31 March 2016.

The investment firm’s portfolio covers telecommunications: media & technology; financial services, transportation & industrials, consumer & real estate; life sciences & agriculture and energy & resources.

Temasek’s compounded annualised Total Shareholder Return (TSR) since inception in 1974 is 15 percent in Singapore dollar terms, or 17 percent in US dollar terms. It has had a corporate credit rating of AAA/Aaa since its inaugural credit rating in 2004, by rating agencies S&P Global Ratings and Moody’s Investors Service respectively.

Temasek has offices in Singapore and nine other cities around the world, including London, covering Europe: New York, São Paulo and Mexico City in the Americas. Beijing and Shanghai in China, Mumbai and Chennai in India and Hanoi in Vietnam.

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After three hundred years, the prospect of the 5 million population nation breaking its ties with the rest of the United Kingdom hangs in the balance and, as broadcaster after broadcaster reports, it ‘is too close to call’. 

What this debate has done is revitalise notions of libertarianism (decentralisation), exposed political arrogance at it most ignorant and revamped the personas of past government leaders who, to all intents and purposes, seemed to have been kicked to the kerb permanently. 

The latter includes former UK Prime Minster – of Scottish origin – Gordon Brown, who only two days ago laid out why he supports the ‘No’ campaign.  As he was interviewed by the somewhat hostile veteran UK interviewer David Dimbleby, Brown talked about the importance of allocating spending ‘according to need’, should the ‘No’ campaign succeed – thereby justifying why spending per head should remain higher for Scottish residents compared to English, Welsh & Northern Ireland residents. This, he laid out, is because Scotland proportionately has a higher population of elderly residents than the other three members of the UK family. 

Even as he spoke it became apparent, again, just how foreign the century-old concept of support-based-on-need still remains for many people, and how innately some seem to recoil at notions of libertarianism. 

Meanwhile, there is a certain degree of cynical humour engendered by the efforts of Westminster leaders of the main parties, (Conservative, Labour & the Liberal Democrats), turning up in Scotland for a family gathering, like disrespectful teenagers after the adults have already identified the major problems and the need for change – claiming that their declarations of regret and remorse really are now genuine and that they care whether the family stays together after all.  A perception that has made the ‘No’ campaign’s push that much harder. 

It’s obviously a complex debate (and almost heart-breaking for some of us who are still a part of that family as we know it). It doesn’t, or shouldn’t be based on issues of Scottish nationalism – who is more Scottish.  Rather, it’s a debate about alienation, disregard and feelings of second-class status for a Scottish population, (and I say this as an English national), which has produced individuals who have given so much to the union in terms of science and culture – and indeed to the world in both areas – as well as bringing a much needed level of intellect to Westminster’s parliament as Scottish MPs.  It’s a debate about a region which, nevertheless, has often been viewed as an adjunct to the UK, primarily valued for its good natural resource supply and space to lodge nuclear weapons; some reasons for resentment me thinks. 

The latest YouGov survey, conducted on behalf of The Times and The Sun, puts the ‘No’ vote at 52 percent with the ‘Yes’ vote at 48 percent. 

With the ‘Yes’ campaign again leading by 4 percent, this is a reversal from Yougov’s previous survey, (held between 2^nd September and 5^th September), when the ‘Yes’ campaign stood at 51 percent, to lead the ‘No’ campaign by 2 percent; final results are due around market opening on Friday 19^th September. 

Of course, wider macro-economic and investment implications can’t be ignored if the ‘Yes’ campaign is successful: 

Boost ETP head of research Viktor Nossek argues that Scottish secession will weaken fiscal fundamentals and expose the UK to unwarranted credit risks. Coupled with diminished political clout within the EU and internationally, and an increased risk of ‘Brexit’, UK equities risk being de-rated, he says.  

He adds: “Until clarity emerges well after the vote …it may be prudent for investors to hedge their exposure to UK debt and equities.” 

Nossek says it’s too early to tell whether permanent damage has been done to both safe haven and risk assets in the UK, but the pound has lost 1.7 percent against the dollar in August and 2 percent in September so far. 

Boost adds downbeat sentiment has also hit the UK’s bond markets, but, bond yields on 10 year UK Gilts have risen back to 2.7 percent, effectively recouping the 27 basis points lost over July and August. “Sentiment in UK money markets is also tense, as evidenced by the spike in short term interbank lending rates and UK government bills this month”, Boost says. 

Nossek adds: “Whatever the result, there is likely to be protracted negotiation thereafter (over the form of independence, or what powers will transfer to a ‘devo-max’ Scotland). 

Alex Salmond, the SNP’s leader, of course argues that a devo-max option would not be put on the table by the current conservative-end of the existing coalition government, should the ‘No’ campaign succeed. 

Nossek’s focus however is on UK debt, with him arguing that this is one of the biggest sticking points in relation to a successful succession vote: “How much debt  [the] rUK should assume when it loses its claim on Scotland’s tax revenues (and expenses) and how much risk is born with it. 

“Given the UK Treasury’s commitment to service all current outstanding government debt, the exclusion of Scotland’s GDP from the national account would mean a higher degree of rUK government indebtedness vs. rUK GDP,” he says. 

Nossak argues that this concern was heightened by Scotland’s separatists threatening to stop servicing rUK’s national debt, if Westminster refuses to share the pound with Scotland. 

He further anticipates; “Because Scotland’s and rUK’s credibility are both at stake, a compromise should emerge, with Scotland paying some of its share to holders of UK government bonds and bills, possibly in the form of extending the maturity of debt and/or lower interest rates. 

“While technically rUK’s gross government debt as a percentage of GDP may go up if Scotland becomes independent, relative to tax revenues it may well not change much. 

“Longer term however, the oil revenues that rUK loses from Scotland will likely be more than offset by gains derived from no longer having to finance Scotland’s relatively high expenditure. 

“Reliant on volatile crude oil prices and ever shrinking oil and gas reserves, Scotland’s main revenue contribution to the union is uncertain and in decline. Yet Scotland’s aging population is certain to drive higher fiscal transfers from Westminster to Edinburgh, unless Scottish taxes are raised. Independent analysts generally forecast Scottish budget deficits at more than 5 percent of GDP for the foreseeable future,” Nossek says. 

Some supporters of succession say market players should look to Ireland/Eire for a model of how a determined small country can reconstruct its economy in the face adversity, in stark contrast to the inertia in a bigger country such as Italy. 

According to IMF calculations, Ireland is still generating more income per capita than the UK. ‘Yes’ supporters say a strong national identity can give enough impetus to a government to be immediately proactive when faced with difficult economic conditions and that, by being a smaller nation, there is more room for manoeuvrability. 

In addition, ‘Yes’ supporters argue, an independent Scotland will have control of  90 percent of the UK’s current oil-producing assets, allowing it  to further develop its private sector from tax revenues in the foreseeable , as well as developing unique  public services. 

BOOST ETP is a WisdomTree Company.

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Keogh will be based in Hong Kong, where he will lead hedge fund, private equity and real estate businesses in Asia Pacific.

He was previously senior managing director for State Street’s hedge fund servicing business, based in Europe.

Keogh joined State Street in 2012 from Goldman Sachs, as part of State Street’s acquisition of Goldman Sachs Administration Services (GSAS). Prior to that, he was head of the GSAS business in Europe and Asia where he established offices in Ireland, Hong Kong and Singapore.

The executive has a total of two decades experience in financial services and has spent the last 14 n the hedge fund industry.

Bhagesh Malde, senior managing director for State Street’s Alternative Investment Solutions business said, “Asia is one of the most significant growth areas for our alternative servicing business …State Street’s recent global research shows that more capital has been flowing into alternative assets and this looks set to continue”.

Malde reiterated the relatively long-held view that institutional investors are seeking and allocating more assets to private equity, real estate and hedge funds “to diversify portfolios, reduce volatility and construct portfolios that match their longer-term investment objectives.

State Street established a presence in Asia Pacific as an alternative funds service provider when it acquired Mourant International Finance Administration (MIFA) in 2010, with locations in Hong Kong and Singapore.  In Asia Pacific, State Street currently offers real estate, hedge fund and private equity servicing in mainland China, Hong Kong, Singapore, Tokyo, and Australia.

State Street has 1,291 bln usd AuAd (Assets under Administration) as of 30 June 30, 2014). 

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