The first poll has been released showing a lead for the pro-independence campaign.
Could the unthinkable really happen?
Well the teenagers (16 year olds can vote) are hugely pro-separatist (responding well to a showing of Braveheart) and whilst Rangers fans still sing unionist songs on the terrace, the polls show Salmond has many of them voting away their British passports at the ballot box.
Perhaps it’s time to seriously look at what a break up of Britain really means for clients’ money ?
- Capital Flight
Sadly, the debate has centred on whether Scotland can keep the pound; of course Scotland can use the pound, so can anyone. Of course, what nobody outside of Britain (or a new formal currency union) can do is use the BoE as lender of last resort and to set monetary policy.
According to UBS every monetary union broken last century had “major deposit shifts in the banking system”.
Even the sniff of an un-backed, new Scottish currency will trigger an unchecked capital flow out of Scotland as depositors rush to find a safe haven rather than take a 15-20% currency correction. This leaves the BoE with the impossible problem of a falling Scottish money supply and a rising one in the rUK.
Trouble is that a now desperate Scottish government would be negotiating with two different Westminster governments (pre and post rUK elections) with no guarantee that anything agreed with the first would be upheld by the second. Then you would have generally poor motivation from Westminster politicians anxious to gauge rUK voters’ opinion on the whole thing.
With Czechoslovakia it was supposed to be orderly negotiation and a union for 18 months. It turned out that the public fear of loss was quicker than the negotiations and the currency union lasted just 6 weeks as Slovakia’s deposits were drained.
- Gilt Yields
Faced with a belligerent Westminster (anxious for rUK votes) the SNP says it will renege on Scotland’s share of national debt. This would increase the rUK national debt by over 9%.
Despite Scottish Financial Services firms shifting over the rUK side of the border increasing rUK GDP you would guess that the rUK credit rating would be affected with some worried feeling in the gilt markets.
- Pound
With all the uncertainty and potential problems, Sterling will probably weaken sharply by at least 3-5% initially.
- FTSE
Expect huge swings for the 100 listed Scottish firms who will struggle with a new and very weak currency, EU uncertainty, increase costs of trade with rUK customers and rising Scottish interest rates.
It’s likely the index will fall as a whole given the overall added complexities and uncertainties.
- What should clients do?
Move money out of Scottish deposits before the rush and sell firms with significant Scottish exposure (BAE, Standard Life etc…). Oh and get foreign currency now rather than later, if they need it.
If you’re confident Britain will survive then you could look at the opposite.
The think tank at the Arms reported that Alex Salmond met the Queen the other day to discuss what Scotland would become…. Alex asked, “Can it be the Scottish Empire and then I would be the emperor?” “No” said the Queen. So Alex asked, “What about the Kingdom of Scotland, then I would be the king?” “No, I think it fits best if we just call it a country Alex!”
Similar to many articles by the NO camp your blog which arrived in my inbox this morning contained the usual half truths and scare stories. To suggest teenagers in a country with more world class universities per head of population than anywhere else would be swayed by Braveheart is insulting. The last poll I had seen focussing on 16-18 year old’s was in favour of the union. Again with Ranger’s fan whose Unionist song’s are actually banned now the vast majority are for the union. This is simply based upon me staying in the West of Scotland and having conversations with them.
With regard’s to the rest of your predictions no one can tell and I would imagine it will largely be guided by the market and to a lesser extent politicians. With both sides wanting to limit uncertainty/market turmoil. Lastly I will personally be voting Yes as I believe it is what is best for the majority in the long term….not just me in the short term.
p.s. Pete if you are going to copy a joke from somewhere else at least make sure it’s funny
Hello Stephen,
I wouldn’t normally reply to your newsletters however I believe that
there are a few points that are fundamentally wrong.
Firstly, no-one has to give away a British passport. People will be able
to choose to keep their British passports, or opt for a new Scottish
one. Both sides have already stated that they recognize duel citizenship
so I don’t understand why you would be suggesting otherwise.
To describe the Bank of England as a lender of last resort is generous
at best. It wasn’t that long ago that the real lender of last resort for
the UK (the IMF) was bailing out the UK economy
(http://www.nationalarchives.gov.uk/cabinetpapers/themes/sterling-devalued-imf-loan.htm).
Using the pound in the same way that Panama uses the Dollar would be a
sensible and stable approach. Panama has one of the most stable banking
systems in the world and it’s banks are forced to act responsibly. This
is the preferred option for the Adam Smith Institute
(http://www.adamsmith.org/blog/money-banking/an-independent-scotland-should-use-the-pound-without-permission-from-ruk/).
If there were to be Capital Flight, it wouldn’t be away from the stable,
resource rich and debt free nation, it would be from the debt mired,
resource lacking poor one.
The largest problem facing a Scottish currency is that it would be
valued too highly due to our resources and strong exports. This was
shown recently on the Hong Kong markets
(http://www.awakenedstate.co.uk/scottish-independence-gets-boost-from-hong-kongs-money-markets/).
I don’t understand where you get the impression that a Scottish currency
would be ‘very weak’.
Debt is also important to consider. The UK Government has already
confirmed that it will take sole responsibility for all debt
(http://newsnetscotland.com/index.php/referendum/9683-uk-responsible-for-all-of-the-debt-confirms-treasury-chief).
All that an independent Scotland will do is make separate payments to
the UK based on our share of assets. Whilst the BoE is in and of itself
not an asset (any nation can set up a central bank – especially one with
a long tradition of banking such as Scotland) it holds numerous assets
that can only be shared through a currency union. If this is withheld,
then Scotland is not legal or morally responsible for any of the debt.
Without the need to pay for wasteful expenditure (such as Trident,
stationing military personnel in 80 countries around the world, the
House of Lords, the HS2 upgrade, and a whole host of other payments –
see:
http://sign4scotland.blogspot.co.uk/2014/03/why-pay-for-what-you-dont-want.html)
we can invest in things that will generate more business activity,
boosting our economy further.
I hope that this clears up a few issues that you are having. Hopefully
you will view independence as an opportunity for a simpler, more
competitive system that rewards talent.
If you need more information then the Business for Scotland website is
an excellent resource.
Kindest regards
Andrew
what is the best way to value one off cases brokerage for the sale of the business versus say regular fees and fund management fees?
Jeremy: An alternative could be to value on funds under management. To discuss more, please click on the following link to speak to one of our consultants: https://my.timedriver.com/7BD1H
Utter nonsense Stephen, I see project fear has got the better of you as well.