SCOTTISH shares led the UK markets down yesterday as investors responded to the real possibility Scotland could vote to leave the union in next week’s referendum.
Sterling slumped again, as a TNS poll put the independence and unionist camps neck and neck.
The FTSE100 slid 0.3 per cent yesterday. Scottish-based banks RBS and Lloyds led the slide, down 1.3 per cent and 2.4 per cent respectively.
Stocks in insurer Standard Life dropped 2.4 per cent, while energy firm SSE’s shares slid 2.3 per cent on the day. Aberdeen Asset Management fell 1.2 per cent, and Weir Group 1.5 per cent.
Analysts at Bernstein last night warned that a vote for independence would push RBS and Lloyds to redomicile to England, with costs of up to £1bn each.
Adding those costs to the longer-term structural expenses of the two banks; large exposures to Scotland, analyst Chirantan Barua believes the stocks should lose around four per cent of their value.
However, since independence became a real possibility, the shares are down around five per cent, indicating some investors believe the costs and the disruption could be greater.
The pound fell 0.57 per cent against the US dollar and 0.23 per cent against the euro, the latest in a string of knocks as the chance of an independence vote rises.
Deutsche Bank analysts yesterday told clients to “be very afraid.”
“The implications of a yes vote would be huge, and are magnified by the sense of institutional unpreparedness,” said FX strategist Oliver Harvey.
“On the currency side, it could at worse lead to a destabilising crisis in the whole British banking system and at best leave the rest of the UK with an unstable currency union in which the Bank of England is forced to continue to provide liquidity to Scottish banks while Westminster thrashes out a fiscal and monetary arrangement with a new Scottish sovereign government holding all the cards.”