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MitonOptimalWeekly Comment - Week 37, 2014A growing uncertainty over the outcome of next week’s independence referendum in Scotland, exemplified by the result of a Sunday Times / Yougov poll putting the “yes” vote ahead for the first time, has caused a right old palaver, not just north and south of Hadrian’s Wall, but also on the international capital markets. What had, until recently, looked like a comfortable(ish) retention of the status quo, has suddenly been thrown into doubt.

Month to date, the UK stock market has underperformed relative to the global trend by around 2%, while Sterling is down a similar amount on the foreign exchanges in US Dollar terms. Gilt yields, meanwhile, are 10 basis points higher.

Whereas the separatist campaign’s ascendance can be attributable in no small part to some astute politicking by the ebullient SNP leader Alex Salmond, the unionist cause has not been helped by the personalities at the forefront of their own campaign. If the charisma-free zone that is former Chancellor Alistair Darling wasn’t enough of a handicap, one can’t help but think this was compounded by the appearance of Gordon Brown at the weekend. Which bright spark, one wonders, could have possibly thought that was a good idea?

Remarkably, while much of the debate between the two sides has centred on the economic consequences of an independent Scotland, we are not much closer to knowing exactly what those consequences would be.

Foremost among the unanswered questions is whether a currency union could allow Scotland to retain the Pound (no, according to the Coalition, Labour and the Bank of England, yes, says Salmond). Meanwhile, a lack of clarity on weighty matters such as apportioning a share of the UK’s national debt, the scale and lifetime of future revenues from North Sea Oil, taxation rates for individuals and corporates, the cost of healthcare and defence are all equally unclear, as much due to the level of disinformation as a lack of facts.

Nevertheless, the fact that some of the major companies within the UK financial services industry (RBS, Standard Life, Lloyds Bank, TSB) have announced plans to move their domicile and/or operations away from Edinburgh in the event of a “yes” vote, is a clue as to the views of big business.

The panicked response this week from Messrs Campbell, Clegg and Miliband suggests that those in Westminster are, somewhat belatedly, taking the threat of Scotland’s departure from the Union very seriously. Might the new promise of greater devolved powers for Scotland’s parliament be sufficient to placate some of the less strident separatists? Possibly, but when you’re dealing with the voting public, it’s anyone’s guess: it’s been suggested, after all, that if “Braveheart” was broadcast on Scottish TV next Wednesday night, a “yes” vote would be nailed on (no pun intended).

Perhaps equally as important as the economic and social implications, an independent Scotland will have a significant impact in the sporting world. Looking at things from a “glass half full” perspective, rugby fans might argue that, given the last three squads have contained only three “sweaties” apiece, they will not be too great a loss to the British & Irish Lions. Similarly, we may just about cope with having to “give back” Andy Murray – especially now that his world ranking has fallen outside the top ten. More worrying, however, with Rio only two years hence, is that Scottish athletes were wholly or partly responsible for almost a quarter of Team GB’s gold medals (7 of 29) at the London Olympics. Of even more of a concern, meanwhile (to this writer at least), no fewer than five of the nine courses currently on the Open Championship rota hail from “the home of golf”. What will happen to them? Rather like the answers to the numerous economic questions, we simply just don’t know!





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