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September 10, 2014 at 10:58 AM
Divorce nearly inevitably leaves deep financial scars, apart from the emotional ones, and the possible dissolution of Scotland’s relationship with the U.K. is already leaving its mark ahead of next week’s independence vote.
A key turning point came over the weekend when an opinion poll gave the “yes” on independence vote its first-ever lead in the run-up to the Sept. 18 referendum.
That change in sentiment startled markets, sending the value of the British pound against a panoply of world currencies sharply lower.
Scotland-based banks, such as the Royal Bank of Scotland and Lloyds, are among the companies whose stocks have fallen hardest since public opinion has shifted in a pro-independence direction.
Indeed, the Financial Times reports that financial advisory firms are seeing a frenzy of financial fear on the part of wealthy investors, citing wealth management firm Multrees Investor Services as moving hundreds of millions of pounds in anticipation of next week’s vote. An executive at the firm was quoted as saying: “If our clients are doing it, then other financial services companies are doing it as well.”
Indeed, one independent financial advisor told the Financial Times a single client has moved over a million pounds — about $1.62 million — out of stocks and into cash, saying that the elderly and those nearing retirement “are worried about their assets.”
While the wealthy are worried, it is a middle-class majority that seems to be swelling the pro-independence vote to its current lead in the polls.
That was the on-the-ground perspective of finance professor Moshe Milevsky, who recently returned from Scotland and England. He was researching his next book, King William’s Tontine, which covers the period of the 1707 Act of Union — which Scottish secessionists are now seeking to undo 307 years later.
Milevsky says he observed a distinct social cleavage separating supporters and opponents of independence.
“I had some very interesting conversations with both ‘commoners’ — hotel staff, taxi drivers, people in the pubs — and the ‘business types’ in Glasgow and got a very different reaction,” he tells ThinkAdvisor.
“I sensed a very strong and growing nationalism and patriotism from the commoners. Most of them felt rather strongly about the importance of voting ‘yes’ and taking advantage of this one chance that doesn’t come along often. Some even used phrases like ‘we were conquered’ and other such language.
“Amongst the business types the reaction was the exact opposite,” the finance and annuities expert continues. “Their fear — which I think is justified, is that King Alex [as they nickname Scottish National Party leader Alex Salmond] doesn’t understand the economic implications, is making false promises, etc. This is an irreversible vote and — unlike the usual electoral cycle — it will be impossible to … ’throw out the bastards’ in a few years, when their economy plummets.
“So, these folks will be voting ‘no,’” Milevsky concludes, “but have to be rather quiet about it because they fear alienating clients, especially if the ‘yes’ side wins.”
Perhaps the most elite of those financial types is Mark Carney, the governor of the Bank of England, the U.K.’s central bank with responsibility, currently, for guiding economic and monetary policy in Scotland and the other components of the U.K., namely England, Wales and Northern Ireland.
