News that Scotland had voted to remain within the UK - and by a fairly hefty 10 percentage point margin - has been greeted with relief. Shares in RBS (RBS) and Lloyds (LLOY) - being Scottish-registered, the pair have to a degree become bellwethers of financial sentiment towards the referendum - rose 2-3 per cent on the news. But the recovery since 8 September - following a YouGov poll giving the yes campaign a narrow lead - has been rather more dramatic. From that point, shares in Lloyds have jumped 6 per cent, while RBS’s have risen 8 per cent.
A flurry of statements have now begun appearing from Scottish-exposed companies. RBS, for instance, lost no time in saying that its plan to redomicile to England “is no longer required” and that it was now a case of “business as usual”. While wind-farm and landfill gas energy group Infinis (INFI) noted that the “outcome preserves the status quo of an integrated UK energy market” - bringing certainty to investment in renewable energy. Indeed, Infinis’s shares jumped over 4 per cent on news of the no vote, while those of Scottish energy giant SSE (SSE) rose 2 per cent.
“From an investors perspective, it is a relief to resolve this uncertainty and markets look set to react accordingly,” said Mark Dampier, head of investment research at Hargreaves Lansdown (HL.). “Investors can continue to manage their savings, investment and pensions just as they did before the referendum.”
While Brenda Kelly, chief market strategist at IG Group (IGG), notes that investors in firms with perceived Scottish exposure will be relieved that management can now “devote their time to business performance, rather than fretting about contract changes or headquarters moves.” She anticipates that recent capital flight from the pound and Gilts should also reverse. Indeed, sterling has today climbed to a two-year high against the euro and a two-week high against the dollar.
But to assume that the no vote will also mean no change is false and all three of the UK’s main political parties have promised Scotland greater devolved powers. Standard Life (SL.), for instance, was quick to recognise that “further constitutional change is very likely.” That could lead to “changes to investment rules and practices,” note Mr Dampier. While Tom McPhail, head of pensions research at Hargreaves Lansdown, thinks increased tax powers are likely “which could in turn impact on pensions and other savings plans.” He doesn’t think change is likely until after the general election, however.
