Scottish Banks in Focus as Sentiment Shifts on Independence


A surge in enthusiasm for Scotland splitting from the U.K. has focused interest on how financial firms based north of the border might weather the shift.

According to the head of the trade body representing the Scottish financial sector, though, the impact has been limited so far.

The polls have “only narrowed slightly so I don’t think there’s increased concern,” said Owen Kelly, chief executive of Scottish Financial Enterprise. Scotland’s financial-services industry directly employs 100,000 people, generates £7 billion ($11.5 billion) for the Scottish economy and manages £800 billion ($1.3 trillion) of funds, according to the SFE.

A recent YouGov poll showed that the margin of voters opposed to independence over those in favor has shrunk to six percentage points from 22 points less than a month ago. The news has sent the British pound into a tailspin and renewed focus on what big companies such as Royal Bank of Scotland Group RBS.LN -0.81% PLC, Standard Life SL.LN -1.27% PLC and Aberdeen Asset Management ADN.LN +0.76% PLC are doing to prepare. The vote is set to take place on Sept. 18.

Lloyds Banking Group LLOY.LN -0.56% PLC and RBS—both of which are based in Scotland—haven’t experienced any reductions in deposits leading up to the vote, people close to the banks say. Their share prices have risen in the last year.

Still, retail investors have started asking more questions about independence. The investment broker Hargreaves Lansdown has reported a rise in calls from customers concerned about the vote. A person familiar with the matter said, though, that Alliance Trust, a Dundee-based fund manager, has seen only a “marginal” increase in calls from clients on the topic.

Similarly, David Nish, chief executive of Standard Life, said on Thursday: “There’s been no real change [in customer calls] and I think that’s because we’ve given really strong assurance to our customers. Our phrase is we’ll do whatever it takes to deliver for them,” he said.

Some economists say that Scottish companies might be too calm about the prospect of independence.

“No one really worried about it. I think that was too complacent to start with and now the polls are tightening,” said Rob Wood, chief U.K. economist at Berenberg, a German bank.”If the vote turns out to be ‘Yes’ the fallout could be serious. I think sterling will fall, uncertainty will spike…I don’t think we can rule out a recession.”

Kevin Daly, an economist at Goldman Sachs International, GS +0.27% said: “In the short- to medium-term, the consequences of a surprise ‘Yes’ vote for the Scottish economy, and for the U.K. more broadly, could be severely negative.”

There are hints that business in Scotland is being affected by the uncertainty. “I have heard, only anecdotally, that people are putting in more currency clauses than they used to because of currency uncertainty… saying, for example, that if there’s a ‘Yes’ vote, the governing currency for this contract would be sterling,” Mr. Kelly said.

Scotland wouldn’t officially split from the U.K. until March 2016 at the earliest, giving authorities time to negotiate issues including what currency Scotland would use, who would regulate its financial industry and whether it would remain part of the European Union.

Analysts say the protracted period of uncertainty could slow the privatization of Lloyds and RBS, both of which are partly owned by the U.K. government.

In the meantime, major banks and asset managers are relying on contingency plans they have been working on over the last six months or so. Lloyds is considering whether to move its headquarters from Edinburgh to England but hasn’t made a formal decision on the matter, according to a person close to the bank. Previously, Standard Life has hinted that it could move its headquarters south of the border if Scotland does break away.

Others, such as Aberdeen Asset Management and the investment managers Baillie Gifford, have said they are in Scotland to stay whatever the outcome of the vote.

Like other lenders, RBS has attended meetings with U.K. Treasury and Bank of England officials to work on plans to ensure customers don’t pull their deposits out of Scottish-based banks in the event of a ‘Yes’ vote, people familiar with the matter say. The plan is to reassure the general public that the British government will continue to insure depositors in Scotland until the country formally separates from the rest of the U.K., people familiar with the matter say.


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