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The City is delighted at Scotland's No vote, but it is already looking ahead
Scotland has voted to remain part of the UK, and on both sides of the border everything will now change
Alex Salmond resigned as First Minister and SNP leader only hours after their decisive defeat in the independence referendum Photo: Getty Images
By Allister Heath
7:59PM BST 19 Sep 2014
27 Comments
There was huge relief but little jubilation in the City of London on Friday. There was certainly delight in boardrooms that the United Kingdom has been saved, and that it was Alex Salmond, and not David Cameron, who was forced to resign — but two factors, one prosaic and the other more complex, help to explain why the financial markets didn’t go wild.
Sterling and the stock market rose, of course — but not by much in the end. The FTSE 100 didn’t set any records, as some had hoped, and the pound soon began to reverse its gains.
Why? The first drag was expectations. The financial and betting markets had been pricing in a No vote with a very large probability; once again, it was confirmed that the weight of money is far more powerful a barometer of public opinion than the analysis of specialist pundits.
The wisdom of the crowd — at least the cash-rich, let’s put our money where our mouth is variety — does work. The pound recovered the ground it had recently lost — but within hours, traders were once again focused on all of the usual big global macro issues.
The second was that while the Government has been saved, at least for now, investors and markets have immediately started to look forward again. Mr Cameron now rightly wants the English and others to be given the same powers as Scotland — English votes for English laws under some sort of, as yet unclear, devolved solution.
For many in the City, this sounds like an excellent idea — Left-wing Scottish MPs will no longer be able to decide on English matters, in the same way that English MPs can no longer decide on Scottish matters.
Even a likely Labour takeover at the UK level in May next year could still mean Tories in charge in England, preventing some of Ed Miliband’s worst anti-business excesses. The devil will be in the detail, however, and markets and business hate uncertainty above all else.
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The business community faces several other issues. In the long-run, the chances of a Brexit — a UK exit from the EU — are now higher than they were, though not as high as if Scotland had voted Yes.
It is clear that campaigners can make huge headway even if the establishment is against them. Expect the Out campaign to use a similar strategy to that embraced by Mr Salmond — though with actual facts and genuine arguments this time, rather than bluff, bluster and denial.
What will happen now to Scottish financial institutions and others that had made provisions to shift their headquarters south of the border in the event of a Yes?
They won’t now relocate — but their confidence in Scotland has undoubtedly been badly, if not irreparably, damaged. Even if tax and spend policy were to remain as it is currently in Scotland, we can expect to see far less foreign direct investment and a slow migration of good jobs to England.
In practice, of course, everything will now change. Scotland will have far greater powers — and it is likely to use them to impose social-democratic policies, damaging competitiveness.
Meanwhile, an English parliament could do the opposite. Arguably, therefore, the City of London could become more competitive as a result of this vote and the accompanying, as yet unpredictable, constitutional revolution that is unfolding. But Labour could still manage to sabotage English devolution.
No wonder business, while delighted at Mr Salmond’s defeat, is looking ahead with some trepidation.
Scotland has voted to remain part of the UK, and on both sides of the border everything will now change
Alex Salmond resigned as First Minister and SNP leader only hours after their decisive defeat in the independence referendum Photo: Getty Images By Allister Heath
7:59PM BST 19 Sep 2014
27 Comments There was huge relief but little jubilation in the City of London on Friday. There was certainly delight in boardrooms that the United Kingdom has been saved, and that it was Alex Salmond, and not David Cameron, who was forced to resign — but two factors, one prosaic and the other more complex, help to explain why the financial markets didn’t go wild.
Sterling and the stock market rose, of course — but not by much in the end. The FTSE 100 didn’t set any records, as some had hoped, and the pound soon began to reverse its gains.
Why? The first drag was expectations. The financial and betting markets had been pricing in a No vote with a very large probability; once again, it was confirmed that the weight of money is far more powerful a barometer of public opinion than the analysis of specialist pundits.
The wisdom of the crowd — at least the cash-rich, let’s put our money where our mouth is variety — does work. The pound recovered the ground it had recently lost — but within hours, traders were once again focused on all of the usual big global macro issues.
The second was that while the Government has been saved, at least for now, investors and markets have immediately started to look forward again. Mr Cameron now rightly wants the English and others to be given the same powers as Scotland — English votes for English laws under some sort of, as yet unclear, devolved solution.
For many in the City, this sounds like an excellent idea — Left-wing Scottish MPs will no longer be able to decide on English matters, in the same way that English MPs can no longer decide on Scottish matters.
Even a likely Labour takeover at the UK level in May next year could still mean Tories in charge in England, preventing some of Ed Miliband’s worst anti-business excesses. The devil will be in the detail, however, and markets and business hate uncertainty above all else.
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19 Sep 2014
The business community faces several other issues. In the long-run, the chances of a Brexit — a UK exit from the EU — are now higher than they were, though not as high as if Scotland had voted Yes.
It is clear that campaigners can make huge headway even if the establishment is against them. Expect the Out campaign to use a similar strategy to that embraced by Mr Salmond — though with actual facts and genuine arguments this time, rather than bluff, bluster and denial.
What will happen now to Scottish financial institutions and others that had made provisions to shift their headquarters south of the border in the event of a Yes?
They won’t now relocate — but their confidence in Scotland has undoubtedly been badly, if not irreparably, damaged. Even if tax and spend policy were to remain as it is currently in Scotland, we can expect to see far less foreign direct investment and a slow migration of good jobs to England.
In practice, of course, everything will now change. Scotland will have far greater powers — and it is likely to use them to impose social-democratic policies, damaging competitiveness.
Meanwhile, an English parliament could do the opposite. Arguably, therefore, the City of London could become more competitive as a result of this vote and the accompanying, as yet unpredictable, constitutional revolution that is unfolding. But Labour could still manage to sabotage English devolution.
No wonder business, while delighted at Mr Salmond’s defeat, is looking ahead with some trepidation.
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