Having covered what seemed to be a remote chance of a 'yes' vote in my last piece, this time around, we take the opportunity to assess the consequences of a 'no'. At first glance, the immediate implications of a 'nay' would appear minimal. Retaining the status quo and putting the uncertainty to rest for some time, the collective sigh of relief that would come from the political set, could convince some investors to adopt a business as usual attitude.
Such sentiment would be misplaced. Once the dust settled on the decision, the law of unintended consequences would undoubtedly kick into gear with companies and capital embarking upon a migratory campaign to find itself on the ‘right side’ of the border.
For evidence of this, look no further than the experience in Quebec, where back in 1995, a similar 'to the wire' vote saw a swathe of organisations seek to remove themselves from any future uncertainty by placing themselves in Canadian territory – costing the French speaking regions jobs and associated taxes.
Within a year of the Scottish vote, we would not be surprised to see a similar dynamic come into play in the more portable areas of the economy such as finance and the service sector.
On its own, this is perhaps nothing more than a point of interest, but as we have commented previously, it is impossible to separate economics from politics. When combined with the likely ‘devo max’ response to a 'better together' victory, we then face the prospect of increased spending north of the border without commensurate increases in taxation. Once more the trade-off of higher borrowing in return for voter acquiescence would serve to impact upon the Government's finances. With a UK general election a mere eight months away, this could effectively open the sluice gates on the dam, flooding the hard-won (but hardly apparent) austerity drive of the past four or so years.
Putting the 'yay' and 'nay' arguments together, regardless of the result, the world has changed. It will be important for investors to take account of these changes and plan for them within portfolios. There shall be winners and losers resulting from the reallocation of capital, labour and wealth – it’s just a matter of identifying them.
The views expressed here are those of the author and might not represent those of Brown Shipley.
