A major election of historic proportions is nearing. Not here in America, but across the pond in the U.K. On Thursday, voters in Scotland will go to the polls to decide on independence from the United Kingdom. A yes vote would end the relationship that started in 1707 with the acts of union between Scotland and England.
Scotland has quite a bit of autonomy under current laws. It has its own legal system, and the Scottish Parliament since 1999 has had high level of authority over the activities of the country and its population of about 5.3 million. It sets laws for health, education and the justice system, but not for monetary, defense or foreign policy, things that are left to the U.K. Parliament.
The union, to many people both in Scotland and in the rest of the U.K., appears to be working just fine. But on voting day, everyone 16 or older living in Scotland will face a simple question: “Should Scotland be an independent country?” (Scottish people living outside of Scotland will not be eligible to vote.)
Although Scotland is relatively small, the outcome could have a big impact on the pound, the euro and the U.K. financial services sector as well as the political landscape in Europe, which has other potential breakaway regions studying what happens in this polling. Countries such as Belgium and Spain have already given hints that they’d veto a quick Scottish entry into the European Union, not wanting to encouraging domestic independence movements of their own.
A yes vote for independence seemed highly unlikely until recent days. Polls showed that remaining in the U.K. was the preferred choice of the majority, given the disruption to Scotland’s economy and uncertainty to its future place in the world. Independence temporarily took the lead in the pre-vote surveys, but unity appears to have a slight edge again heading into the stretch run.
U.K. politicians, Bank of England and business leaders in London have done all they can to discourage a yes vote. They’ve shot down the notion that an independent Scotland would be able to use the pound sterling as its currency. They’ve stressed that many businesses (and jobs) currently based in Scotland would flee to England so that they would still have access to the European Union … That Scotland’s all-important — and massive — financial sector could not count on the support of a Scottish government and would have to relocate to England … That Scotland would have to take on its share of U.K. debt and would have to develop its own armed forces and defense capabilities.
|The Royal Bank of Scotland and other financial companies would likely leave Scotland should residents there vote for independence.|
Scotland’s showcase bank, the Royal Bank of Scotland, nearly collapsed during the financial crisis and had to be bailed out by the U.K. government, which still owns a stake in it. It has indicated it would move its base out of Scotland upon independence, saying independence could have a “material adverse effect” on the bank. Other banks, like the Bank of Scotland, now part of Lloyds Bank (which also had to be bailed out by the U.K. government), have assets in Scotland. In fact, the assets of banks based in Scotland (about $3.1 trillion) would overwhelm an independent country should another financial crisis surface. Standard Life insurance has 5,000 employees in Scotland. It, too, has hinted it would bail out with a yes vote.
Of course, there are advantages of independence to Scotland, which has a long, proud history. Scotland has a lot of oil in the North Sea, and it could retain more of the money derived from the asset instead of sharing it with the rest of the U.K. Scotland’s first minister, Alex Salmond, has driven the independence movement, and said he was sure of victory. “Scotland stands on the cusp of history. I am more confident than ever that the people of Scotland are going to say ‘Yes,'” at Thursday’s historic referendum,” he wrote in a newspaper article. To read more about the pro-independence case, click on this Yes Scotland site.
This link will take you to a recent look at the election process.
The union, for the most part, seems to have worked well for the past few centuries. Yes, it’s a matter of pride to be an independent country, and there will eventually be some benefits. But I’m hoping Scottish voters vote with their minds and not their hearts. The financial disruptions to the economy will mean job losses and a loss of business prestige.
What are your feelings? Money and Markets has a lot of readers from the United Kingdom. What’s your view on Scottish independence? Wouldn’t it be better for it to remain a part of the U.K., which plays a big role in financial and political matters throughout the world, than to be a small, perhaps struggling country with few international ties? Are you in Scotland? I’m sure our readers would like to get your insights. Click here to add your view.