On the 18th of September, Scotland is due to vote on the question of leaving the UK and becoming an independent state. Until this week, all major polls had shown that a majority of Scots wanted to remain British and a part of the United Kingdom, however, a recent YouGov poll suggested that those wishing for independence has taken a narrow lead (well within the polling uncertainty).
The effect of this poll has been to put pressure on Sterling which has fallen to an eleven month low against the Dollar coming off $1.66 at the start of the month to stand at $1.61 currently.
The main driver for independence, the Scottish Nationalist Party (SNP), has been trying to convince Scots that they would be better off in a separate state and that many of the objections raised by unionist are either scaremongering or bullying tactics. As a dispassionate Englishman living outside the UK, this seems to be nonsense.
There is not time to cover the full argument of claim and counter-claim here. However key amongst them the SNP claims that the UK will agree to a Sterling currency union with an independent Scotland despite statements to the contrary from all the major UK political parties. It thinks it would enjoy a smooth, fast-track membership of both NATO and the EU although others say this will not be so (Spain would be opposed to EU membership for fear of stoking separatism in the Catalan region; Scotland would adopt an anti-nuclear weapons policy and not allow use of the Faslane naval base for UK nuclear submarines. Yet it wishes to place itself de facto under the NATO nuclear umbrella. It is unlikely that this would foster a smooth membership of NATO, nor has Scotland indicated that it would spend 2% of GDP on defence, a membership requirement). Lastly, an independent Scotland, refused a currency union with the nation it is leaving has stated that it would renege on its proportional share of UK debt. Financial institutions are unlikely to look kindly on a nation which fails to pay its debts, so Scottish borrowing would likely be priced significantly higher that UK debt. The rest of the UK would be less than enchanted by this behaviour as, without doubt, the Scots enjoyed their share of the monies borrowed in the nation’s name.
The rest of the UK (and Scots living outside of Scotland) have no say in this potential break-up of the nation. The vote has certainly stirred up ill-feeling on both sides and the current uncertainty is hurting Sterling and sectors of the UK stock market with ties to the potential break-away state. Uncertainty will prevail until the result is in and be ended by a “no” vote, but a “yes” vote will increase pressure on the currency and the UK economy for many months to come.