Comment: When uncertainty is all we can be certain of

Just a month to go to Scotland’s independence referendum and investors in Scottish companies and financial institutions have so far maintained a wary calm. The intense political clamour has barely impacted on the share ratings of Scottish companies, sterling or the stock market.

Bill Jamieson. Picture: Ian Rutherford

Private sector job demand is strong and Scottish house prices are holding up. “Business as normal” is largely due to opinion poll readings pointing to a continuing lead for the No camp, while bookmakers put the likelihood of a Yes vote at just 30 per cent.

Nevertheless, there is a wary apprehension. Opinion polls failed to capture the strength of the pro-SNP swing in 2011 and its late surge in the final stretch.

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So what it might mean for investors? There are predictions of capital flight were an independent Scotland to opt for informal currency union, with the major Edinburgh-headquartered banks moving down south. Other financial service companies would be likely to follow, with retail investors in train. Analysts at Barclays reckon that a trade-weighted Scottish currency could fall by as much as 16 per cent in its first year.

But it is not only Scottish investors who have cause to be wary. A Yes vote would have implications for the value of sterling, with Kathleen Brooks, research director at, reckoning that the pound could plunge from around $1.70 now to $1.60 within a few hours of a Yes vote.

Leading investment banks have warned of an exodus of financial companies from Scotland – especially the big banks – in the event of Yes, while Citigroup and others have cast doubts on the SNP’s fiscal projections post-independence, warning that Scotland outside of a formal currency union would be likely to face a single “A” credit rating and interest rates 1.25 percentage points higher compared with the UK’s – that is, around 4 per cent compared with the UK’s current 2.75 per cent.

Last week, Dan Furneaux of insurance giant Legal & General’s investment management research unit, pointed to the market’s dislike of uncertainty and warned that a Yes vote “would create bucket-loads for the next few years”.

The stately Investors Chronicle has made Scottish independence its lead article this week, with a ten-page assessment of what a vote for break-up would mean for investors. Little of it is reassuring.

For the moment it’s business as normal, but we know a number of leading companies based in Scotland or with substantial operations here have already expressed concerns on the consequences of Yes vote and as these may signal share price vulnerability, they cannot be lightly dismissed. Regulatory questions and extra regulatory costs are among the top concerns. Savers and investors would also want to know quickly whether the Financial Services Compensation Scheme would still exist for those living in Scotland and for those living outside Scotland who hold savings and investments in Scottish companies.

Royal Bank of Scotland would face immediate problems as a lack of any currency union between the two countries would leave Scottish banks without a lender of last resort. Also, EU rules require a bank to have its headquarters in the country in which it carries out the majority of its business. Similar concerns would affect Lloyds Banking Group, whose HBOS subsidiary has its headquarters in Edinburgh. Standard Life has indicated it intends to move at least a large part of its business south in the event of a Yes vote.

Property investment and development company Caledonian Trust said in its interim results that the economic prospects for an independent Scotland “are not favourable”, though Dan Macdonald, chief executive of Macdonald Estates and a doughty SNP supporter, says independence would create growth.

Maarten Slendebroek, chief executive of fund management group Jupiter, said the firm’s Scottish business would prosper regardless of the outcome. But US fund management giant BlackRock has said Scottish independence would bring “major uncertainties, costs and risks”.

The Investors Chronicle has a disconcerting analysis of the cost and legal complexities involved in relocation for the 41 investment trusts registered in Scotland. Moving south to avoid the uncertainties of regulation, contract law, tax treatment, over-arching legislation and currency uncertainty is neither straightforward not cheap.

But at least there’s two groups likely to be laughing all the way to the bank. For lawyers and accountants, a Yes vote is set to be a Klondike stretching ahead for years.