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Page last updated at 14:45 GMT, Sunday, 19 October 2008 15:45 UK

HBOS merger 'could break Union'


Torquil Reoch
For the Politics Show in Scotland

Jim Spowart
Mr Spowart said the merger could lead to severe unemployment

A senior Scottish businessman has told Politics Show Scotland that he thinks the crisis in the Scottish banks could cost the country 100,000 jobs.

Jim Spowart was a leading executive involved in the setting up of the HBOS subsidiary Intelligent Finance, and other modern banking initiatives.

He said that the UK Government would be putting the Union at risk if it allows the merger of HBOS and Lloyds TSB to go ahead.

In the past he has argued publicly in favour of the Union but, speaking to Politics Scotland, he said that HBOS must be retained as an an independent bank headquartered in Scotland.

Mr Spowart said that the word in the City had been that a merged HBOS would be aiming to make cuts of 3bn, and the implication of that was that 100,000 jobs would be at risk in Scotland, including direct employment and support industries like accountancy and law, in and around Edinburgh.

'Weather the storm'

He said the outsourcing of call centre work, and the duplication of head office functions, meant the merger would lead to severe unemployment and demoralisation in central Scotland.

And if that happened, he said, people would say "the government had it within its power not to allow this merger to go through and therefore could be responsible at some point for perhaps even breaking up the union".

Earlier in the Politics Show, Scottish Labour leader Iain Gray declined an opportunity to endorse the Secretary of State for Scotland's comments to the effect that Iceland and Ireland were linked in an "Arc of Insolvency".

Iceland's Prime Minister Geir Haarde had already told BBC Radio Scotland's "The Business" that he expected his country's economy to recover, although in future it would not be as a centre for international financial services.

Iain Gray did say he thought this was important advice for Scotland, as "a small country cannot build its prosperity on being a leader in global banking".

In response SNP Deputy Leader Nicola Sturgeon disagreed, saying "small countries tend to be better placed than big countries to weather the storm". She added: "Seventeen banks have gone to the wall in the United States, none in Ireland."

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