Braveheart or bust: the Scottish independence referendum
There have been some powerful arguments in the debate over Scottish devolution. I don’t think anyone for a second would have underestimated the passion and emotive arguments that could be made from the Scottish people for independence. Having started out thinking that this would be an easy heads beating hearts scenario and that the Scots would have to admit that staying part of the UK could only be a good thing, I have begun to think that the undecided voters and the weaker ‘no’ voters may now decide to vote ‘yes’.
The reason for this is not that Salmond’s arguments or case for devolution were particularly strong, it was more that Darling, and the rest of the ‘Better Together’ champions, have run such a poorly constructed campaign. Simply saying that Scotland has no option for currency, no ‘plan b’ is not an argument, it’s a scare tactic. When you are appealing to people to see reason, fear is not necessarily the best way forward. Likewise the relocation of Trident was another obvious argument that could easily backfire, as who really wants weapons of mass destruction on their doorstep?
The situation now is that no matter if it’s a yes or a no vote this will be the equivalent of a messy divorce. If we stay ‘better together’ for the kids, there will be huge animosity on both sides. If we split then do not underestimate the pettiness and sheer disdain that Westminster will show towards Scotland. I have the feeling that the UK will end up with the house, the kids and all the family friends.
Without trivialising the severity of this, I would see this as a lose-lose situation for Scotland and also for people in London. Cable has dropped over the last few month. This has very little to do with Scotland. GBP is at six-year highs against USD; with the world markets expecting the UK to put up rates in 2015 there had been institution buying for years. Now that retail traders hear the news they are all buying at the end of the bull run as the rest of the smart money gets out. There can be an argument for the Scotland issue spooking cable but as Scotland knows the UK needs Scottish exports (£100bn) in sterling so the currency is going nowhere.
My other main concern is the amount of business that will leave Scotland. We saw £2bn wiped off Scottish companies yesterday as the yes vote gathered momentum. This is the markets voting with their feet. The other losers will be London. This is the only natural place businesses and well-paid Scots will go to. This means more pressure on the frail infrastructure and once again more of a bid coming into the property market. London keeps building and people keep coming; this could be the straw that breaks the camel’s back in terms of London being able to cope with one more influx of ‘foreign’ money.
In conclusion the UK and Westminster have been very lax in both arguments and tactics to convince Scotland it needs to stay within the UK. I believe that Scotland has called the UK’s bluff and will get more power and control regardless of the outcome. I can only see, with an aging population and known health risks, that their argument of a better NHS, job creation and a wealthier less-taxed population doesn’t add up. Economies of scale are the only way to potentially achieve something close to this.
Chief Market Strategist