Tomorrow, Scotland goes to the polls.
By Friday morning, we’ll know the results.
Either Scotland will be an independent country, with a large minority of disappointed unionists, or it’ll remain part of the UK.
But even then, all those disappointed nationalists will still be on their way to gaining even more decentralised power than they could have thought possible at the start of the campaign.
Whichever way Scotland votes, Britain has changed.
And investors in the UK will be counting the costs for a long time to come…
Forget what you’ve heard about this being a civilised debate
You’ll have heard a lot of nonsense about the Scottish referendum by now. But there’s one bit that no one has yet had a proper go at debunking.
It is that the debate has been amazingly civilised. As such, it should set a gold standard for countries that find themselves immersed in internal conflict either now or in the future.
This is ridiculous. That’s partly because there should be no need for nastiness in Scotland – no one is remotely oppressed; no one being badly treated; no one lacking basic service provision. So you can’t compare it with efforts to gain genuine freedom from nasty states.
And those efforts you can compare it too – say those of the Faroe Islands, Norway or Malta – were, as far as I know, entirely peaceful.
But it is also ridiculous because the debate up here in Scotland isn’t particularly civilised. Sure, there isn’t much violence about, but we are unquestionably now a nation entirely split.
There’s anger in the air, and I’m hearing more and more stories of friends and families no longer talking to each other. Even I look around at friends who intend to vote the other way from me, and wonder if I will still want to have them over for a drink if their side wins and mine suffers as a result.
Alex Salmond set out to split the UK. But he’s done something else along the way: he has split Scotland.
Why David Cameron has to go
The consequences of that divide will last long after the referendum is over, regardless of which way it goes.
Unfortunately, that’s not just a problem for Scotland. It’s one for the wider UK as well.
You see, it doesn’t matter whether the vote is yes or no. The result is still uncertainty, volatility and a change in the UK’s global reputation as a good place to be. That is bad news for anyone with investments in sterling or anything else tied to the UK’s position as a safe haven.
If the vote is a ‘yes’ – which the bookies still tell us is unlikely – we now all have a pretty good idea as to what will happen to the UK and to Scotland (see our story here if you are still in doubt – it isn’t pretty).
But even if it is a ‘no’, things look pretty dire.
First thing on Friday morning, say the analysts at GaveKal, the market will shift its focus from Scottish politics to UK politics. And it will find David Cameron sorely wanting.
His government misjudged the timing of the referendum. They got the question wrong, which in turn forced the unionists to run a negative campaign. They didn’t insist on the kind of supermajority (say 60%) that is usually used for huge changes to the status quo. They allowed children to vote. And they ignored the inadequacies of the Better Together campaign until it was far too late.
Worse still, all of these failures have set in train a UK-wide constitutional crisis. The government has panicked into offering an ill-thought out ‘devo-max’ to Scotland. This means it will lose control of Scotland’s budget (and hence budget deficit) and will face calls from every other region in the UK to enjoy the same rights. Cameron’s government has let us all down. He has to go.
The three grim scenarios investors in the UK now face
But then what? Foreign investors will note that this debacle has made it almost a given that the next UK government will be a Labour government.
Given the various pledges and promises we have heard from the party and its leaders over the last few years, I think we all know what that means: “probably the most radical shift in policies on taxes, public spending, financial regulation, labour markets and business intervention that Britain has seen since the 1970s”, says GaveKal.
A ‘no’ vote won’t see quite the same flight of capital out of the UK as a ‘yes’ vote – but it would still make the UK look like a less gold-plated place to keep capital than it did six months ago.
We have been revealed as a conflicted nation now offering investors a group of generally rubbish possibilities. By next week anyone with money in the UK could be invested in:
1) an acrimonious national separation process, paralysed by capital flight and a collapsing currency;
2) a still-combined union led by a weak leader embroiled in an unmanageable constitutional crisis of his own making, or;
3) a leaderless country on the way to indulging in a doomed-to-fail attempt at reversing the effects of globalisation via regulation and redistribution.
Who’d want to invest in any of that?
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