InvestmentsSep 16 2014

Scotland could become ‘next Greece’, claims Miller

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Fund manager Alan Miller has claimed Scotland could become like Greece with a spike in unemployment, rising goods prices and a housing market drop should it vote for independence.

Mr Miller, founder of SCM Private, said he expected unemployment in Scotland - presently at 7.1 per cent - would “rise materially”, particularly youth unemployment, now at 19.2 per cent.

A large part of this rise could come from the financial sector in Scotland, which he expected “would contract”. Several major Scottish financial institutions, including Standard Life, Royal Bank of Scotland and Lloyds Banking Group have said they would likely move south of the border in the event of a yes vote.

Roughly 7 per cent of total Scottish employment is within financial services.

Mr Miller added Scottish banks would have to lend less and charge more and that prices in shops would rise - something big chains including John Lewis and Marks and Spencer have warned of.

Mr Miller added the average house price would call by more than 15 per cent.

“Whatever the result of the Scottish Referendum, investors have to look at overall fundamentals and sentiment – and that requires a long-term perspective,” Mr Miller said.

“If you are currently investing in the whole UK market, you have to ask what you would end up with if Scotland followed almost every other country in the world and had its own stockmarket (made up principally of financial stocks).

“Remaining UK listed stocks would be little affected – drug stocks tend to be dominated by US sales and even home grown retailers e.g. Tesco’s sales tend to be dominated by England. Maybe the Scottish companies you are invested in would end up being relisted in the UK?”

Mr Miller also questioned whether investors would want to buy Scottish debt over UK debt.

“It seems unlikely so no doubt the price of the Scottish debt will need to fall to reward investors,” he said.

“There could well be years more of wrangling over how devolution will work in detail.”