Global banks are waking up to the threat of a United Kingdom split asunder following shock polls this weekend, and have issued stark warnings to investors to get their money out of Britain. Nomura, Japan’s biggest bank, has warned of a “run on UK assets”, and the possibility of the pound dropping in value by 15 percent, the Daily Mail has reported.
“We could see a lot of money being pulled out of UK investments. Sterling could fall at least 15 per cent in a worst-case scenario. These are scary times,” commented Numara’s foreign exchange strategist Jordan Rochester.
His fellow strategists were in agreement. Russ Koesterich, chief investment strategist at BlackRock, the largest fund manager currently in existence, explained how the possibility of a Yes vote had taken strategists by surprise: “Everybody has been focusing on geopolitics, with issues in the Ukraine and the Middle East… but this is the one thing they were not looking at.
“Up until now this was not on the radar of many investors, certainly not in the US, and if it was people assumed this vote would not pass. If the Yes vote passes, then investors would have to accept a prolonged period of uncertainty for UK assets.”
“It is totally bizarre,” Steven Jen, head of SLJ Macro Partners told the Telegraph. “They [Asian investors] simply don’t understand it, and nor do I. Until a week and half ago everybody thought there was a zero probability of Scotland voting Yes.
“We have always assumed the United Kingdom would stay united, but now everything we thought about the UK has suddenly been tested, and will have to be repriced.”
The uncertainty has been caused by a shock poll by YouGov for the Sunday Times last Sunday, in which 51 percent of respondents indicated that they would be backing Independence, versus 49 percent who wanted the Union between Scotland and the rest of the United Kingdom to remain in place, when the undecideds were discounted.
A separate poll on the same day by the Yes campaign had the pro-Unionists four points ahead when undecided voters were excluded, however, there is a strong feeling that the Yes campaign has the momentum on their side with just over a week to go.
The pro-Union Better Together campaign leader, former Chancellor Alistair Darling said that the results were a “wake up call”, and that the result would “go down to the wire,” adding “But the message I take from them is clear–if you want Scotland to remain part of the UK family you have to vote for it on 18 September.”
The poll results have also caused panic in Westminster. Tomorrow’s Prime Ministers Questions will be a b-team affair, as Conservative Prime Minister David Cameron, Liberal Democrat Deputy Prime Minister Nick Clegg and Labour leader Ed Miliband have issued a joint statement signalling that they have all agreed to skip the debate in order to campaign for the continuation of the Union in Scotland. The debate will go ahead, but is likely to feature Leader of the House of Commons William Hague (Conservative), and Labour’s Deputy Leader Harriet Harman.
Last night Cameron hosted a drinks reception at Downing Street for company bosses, at which he urged those gathered to show outward support for the No campaign in any way possible.
“The PM emphasised the need for us to do everything we can over the next nine days to keep the union together. He wants us to highlight the dangers of a Scottish exit in any way we can,” one company boss told Sky News. Attendees included West Ham United vice chairman Baroness Brady, and Sir Richard Broadbent, chairman of Tesco.
The uncertainty has already affected markets, with the value of sterling dropping yesterday by more than one percent – its biggest one-day drop in 13 months. It also posted a ten month low against the dollar.
“Sterling could weaken a lot, though just how far it falls depends on a complicated dynamics. If Scotland tries to keep all the oil and refuses to take on its share of the public debt, there could be a run on UK assets,” said Jen.
Commenting on the currency slide, Adam Myers, European head of FX strategy at Credit Agricole said “The speed with which the polls have flipped has clearly been a shock to a lot of people.”