RBS, Lloyds, Clydesdale, TSB, Tesco Bank, Aegon UK and Standard Life have all now reportedly made plans to move to England if Scotland secedes from the UK.
But that may be the tip of the iceberg. Scottish Widows, Aggreko, parts of BP, John Menzies – what would they do, faced with the prospect of an isolated home nation, with such uncertain prospects?
What might await the Scottish people? The lavish spending promises of Alex Salmond would unravel in the face of harsh fiscal realities.
As Bank of England governor Mark Carney stressed again last week, there is no way the UK would extend a currency union to Scotland in the absence of the political union.
Invariably those who believe in independence argue that this is bluff and everything will be alright on the night. But what if it isn’t? Why would the UK act as lender of last resort to a nation over which it has no fiscal influence?
Under independence, Scottish fund houses would face the threat of losing access to the EU’s Mifid fund passporting scheme. John KenchingtonWithout monetary policy levers Scotland would not be creditworthy.
With its unfavourable demographics, higher costs of borrowing and the loss of the UK block grant, where is the fiscal surplus necessary for Scotland to build up wealth to reassure its lenders going to come from? Savings from jettisoning Trident and diminishing oil revenue from the North Sea will not be enough.
Aberdeen chief Martin Gilbert last week spoke out for independence, reportedly saying Scotland would start from the “desirable” position of having little or no debt. But what about what Scotland would owe the UK? Does it wish to join the ranks of defaulters alongside Greece and Argentina?
He also said Scotland’s real wealth lies in its people, in particular those in its financial sector. That’s true, but no major financial organisation is certain to remain in Scotland in the event of a ‘Yes’ vote, so what are these people going to do?
The independence campaign is based on sheer nationalism.
Where would Scottish secession leave the investment industry?
The IMA issued its annual industry report last week, highlighting the UK’s status as the world’s second-biggest asset management centre and Scotland’s major role within it.
But under independence, Scottish fund houses would face the threat of losing access to the EU’s Mifid fund passporting scheme and there is no guarantee the UK or EU would establish – at least quickly – bilateral trading agreements to replace it. That’s why fund groups are already moving money south of the border.
After independence, they could move their funds to Luxembourg, Dublin or London, or split them up, but this would be costly and disruption deters investors, perhaps costing Scotland dearly in its biggest fund market.
Scotland’s status as a world-class investment centre would be in doubt.
John Kenchington is editor of Investment Adviser
