BAE share price: CEO warns of Scottish independence impact on pensions

BAE Systems Plc’s (LON:BA) chief executive Ian King has warned of the impact that Scottish independence could have on employee pensions, The Telegraph has reported. King’s statement marks the second time the FTSE 100 defence contractor has expressed alarm over a potential ‘yes’ vote and comes on the heels of a warning by Diageo’s (LON:DGE) boss, who earlier this week said that tax regulation changes and currency uncertainty could damage Scotch whisky distillers.

The Telegraph yesterday quoted BAE’s Ian King as writing in an internal blog to staff that if Scotland became independent and subsequently joined the European Union, the company’s pension schemes “may be caught up in EU regulations relating to cross-border pensions”.

“The reality today is we can’t say how our pension schemes would be affected,” King wrote. “There would be a number of possible outcomes.”

In November last year, the National Association of Pension Funds (NAPF) warned in a report that any cross-border schemes operating in the EU needed to be “fully funded at all times”. The Telegraph notes that BAE has a total pension deficit of £3.5 billion, although this is split among several schemes.

A BAE spokesman told the newspaper that the company had long-term plans in place to plug the deficit which had been agreed by the scheme’s trustees and regulator, adding that should the deficit be affected by cross-border rules, not all of the £3.5 billion would have to be made up.

King’s pension comments are not the first time that BAE Systems, which runs Scotland’s largest military shipyards in Glasgow, has weighed in on the independence debate. In March, the company said in its annual report that continued union between Scotland and the rest of the UK offered “greater certainty and stability” for BAE’s operations.

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Ivan Menezes, the chief executive of the world’s largest producer of Scotch whisky, also voiced his independence concerns this week, focusing on the implications of Scotland leaving the EU.

Other FTSE 100 companies, including Lloyds Banking Group (LON:LLOY) and BP (LON:BP), have also warned of risks associated with Scottish independence, while pension provider Standard Life (LON:SL) said that it would consider moving operations south of the border in the case of a ‘yes’ vote.

By contrast, British Sky Broadcasting Group Plc (LON:BSY) last month signalled that it would remain in Scotland regardless of the outcome of the September referendum.

Willie Walsh, the chief executive of British Airways owner International Consolidated Airlines Group Plc (LON:IAG), earlier this year said that an independent Scotland could be a positive development for the company given the Scottish government’s promise to reduce and possibly abolish air passenger duty.