A month ago, the market was showing absolutely no interest whatsoever in Scotland. Everyone assumed a No vote and everyone assumed that post 18 September, everything would just go back to normal.
They aren’t assuming that anymore: by the time you get your next Moneyweek, Scotland could have voted to break up the most successful political and economic union in history, the UK. And that has consequences for all of us, some short-term and some long-term.
I wrote at length about this last week, and have posted more thoughts on our blog, but I do think that it is worth reiterating the key point: my reason for voting No is not based on the idea that Scotland can’t go it alone; it is based on my opinion that going it alone will make things worse, not better for those of us who live in Scotland and possibly elsewhere.
There are endless short-term things to worry about here. There is the volatility of the pound; there is the effect of uncertainty on the gilt and equity markets – something such as this has to push up risk premiums; and there is the near certainty that the hostile negotiations surrounding the separation in the run up to the next UK election will make us all utterly miserable.
Some of these problems can be washed over with a new injection of easy money (look out for more UK quantitative easing (QE) post a Yes vote and see here for the European Central Bank’s (ECB) latest effort). Some cannot.
But, for Scotland at least, market volatility and neighbourly hostility will be just the beginning. You could argue that one of the big drivers behind the independence movement has been the collapse of Scotland’s manufacturing base in the 1980s, something that has long been blamed on Margaret Thatcher (rather than global competition), and which hit the central belt (now full of Yes voters) very hard.
The worry, for me at least, is that a vote to separate will set in motion a train of events that will collapse another, bigger, sector of the Scottish economy – services.
An example: Scotland relies heavily on the financial sector and that isn’t sticking around to see what happens next. Standard Life set out its plans to shift most of its business south in the event of a Yes vote earlier this week, and it is clear that money – both professional and personal – is flooding out of Scotland.
My own inbox is full of emails from friends asking me which banks are definitely based in England as well as wanting to confirm which banks their wealth managers and fund supermarkets hold their cash in.
The Scottish government may have forgotten the lesson of Northern Rock (better to join a bank run earlier rather than later), but the British public clearly have not. Too many campaigners have been treating the referendum as if it were merely an opportunity to use a country as a guinea pig for a mildly amusing socialist experiment.
The beginning of capital flight makes it clear that that just isn’t OK. Keeping the manufacturing industry going in the 1980s would have required rising productivity and falling export prices. That was almost impossible to deliver at the time.
Keeping the modern Scottish economy, with its reliance on the services industry, going now requires stability and certainty. It is possible to deliver that now. The Scottish electorate has the power to do it next week – with a clear vote for the union.
Given that all the things the Yes Campaign say they want involve hefty state spending – which is reliant on economic success to generate good tax revenues – let’s all hope it does.