Sterling drops as poll shows Scots may vote to break up UK

Reuters News
Posted: Sep 08, 2014 7:21 AM

By Guy Faulconbridge and Angus MacSwan

LONDON/EDINBURGH (Reuters) - The British pound slid and the stock market shuddered on Monday after an opinion poll showed for the first time that Scots may vote for independence next week in a referendum that could herald the break up of the United Kingdom.

The survey prompted concern bordering on panic among Britain's ruling elite, with Prime Minister David Cameron's Conservative-led government promising proposals this week to grant Scotland greater autonomy if it stays.

Cameron's job would be on the line if Scots vote on Sept. 18 to secede, less than eight months before a national election planned for May. His spokesman said on Monday the government was not making contingency plans for the possibility of Scottish independence.

Sterling fell more than 1 percent - its biggest one-day drop in 13 months - to $1.6145 in early European trading while more than 3 billion pounds ($4.8 billion) was wiped off the market value of five London-listed companies with large exposure to Scotland.

"The speed with which the polls have flipped has clearly been a shock to a lot of people," said Adam Myers, European head of FX strategy at Credit Agricole in London.

After months of polls showing nationalists heading for defeat, the survey by the respected YouGov pollster raised the real prospect that secessionists could achieve their goal of breaking the 307-year-old union with England.

If Scots voted to leave the United Kingdom, Cameron would face calls to quit before the general election, while the opposition Labour party's chances of gaining a majority could be scuppered if it lost its 40 Scottish lawmakers.

Cameron, who visited Queen Elizabeth in Scotland on Sunday, has insisted he will not resign. British media quoted a palace source as saying the monarch was concerned and had asked for daily updates on the situation.

A vote for independence by Scotland's 4 million voters would be followed by negotiations with London on what to do about the pound, the $2.1 trillion national debt, North Sea oil and the future of Britain's nuclear submarine base in Scotland ahead of independence penciled in for March 24, 2016.


With less than two weeks to go before the Sept. 18 vote, the poll put the "Yes" to independence campaign on 51 percent against "no" camp on 49 percent, excluding undecided voters, overturning a 22-point lead for the unionist campaign in just a month, the Sunday Times said.

Less than 12 hours after the poll was released, Britain's second most powerful man promised on national television that plans would be set out to give Scotland more autonomy on tax, spending and welfare if Scots vote against independence.

"You will see in the next few days a plan of action to give more powers to Scotland," finance minister George Osborne said.

"Then Scotland will have the best of both worlds. They will both avoid the risks of separation but have more control over their own destiny, which is where I think many Scots want to be," Osborne told the BBC.

But the comments were cast as panic by Scottish First Minister Alex Salmond, leader of the Scottish National Party (SNP), who said the campaign to save the union was spiraling into self-destruction.

He scoffed at last-minute offers of greater autonomy for Scotland from London parties, saying: "I've no doubt they'll cobble together something because having failed to scare the Scottish people, the next step is to try to bribe us."

The polls have tightened dramatically as undecided voters make up their minds after Salmond appeared to trounce "No" campaign leader Alistair Darling in a television debate and Scots were irked by a perceived scare campaign by unionists.

Labeled "Project Fear" by nationalists, the unionist campaign has drawn criticism from many unionists who say it has been complacent, negative and riven by divisions.

"The campaign so far has been narrow and negative," said Henry McLeish, a former Scottish first minister from the Labour party. "It’s also been patronizing and its really lacked emotion, lacked passion and lacked soul so therefore in a country like Scotland where the heart and head are to be taken together, that’s been a major deficiency."

Salmond has scored well with Labour supporters and women, convincing many that the economic arguments are not as dire as depicted by his adversaries, polls show.

With Cameron's Conservatives unpopular in left-of-center Scotland, the "No" campaign is turning to former Prime Minister Gordon Brown as its main hope of turning the tide.

Touring Scotland to rally the unionist vote, Brown declared: "The truth is Scots would be entering an economic minefield under the SNP's economic plans for separation."


British newspapers headlined the biggest domestic threat to the United Kingdom since Irish nationalists created a breakaway republic almost a century ago.

"Scots vote chaos - Jocky Horror show," read the front page of the Sun, Britain's most read daily, while the right-wing Daily Telegraph declared on "Ten days to save the Union".

In Scotland, the pro-union Scotsman cautioned against a panic reaction.

"When Scotland's future is on a knife edge and Westminster politics is facing altercation, calls for calm may struggle to be heard. But whatever the referendum result, calm there must be if reason is  to prevail and panic not to take over," it said.

Britain's benchmark FTSE 100 index fell after the YouGov poll. Five of the top 10 falls were companies connected to Scotland - Lloyds Banking Group, Royal Bank of Scotland, Standard Life, energy group SSE and engineering firm Weir group.

Banking industry sources told Reuters last week that Lloyds is considering moving its registered offices to London if Scots vote for independence. RBS is also examining its options.

The two banks have warned that an independent Scotland would present a significant risk to their businesses, impacting their funding, tax and compliance costs.

Nationalists accuse London of squandering Scottish wealth and say that Scotland would be one of the world's richest countries if it took control of its own destiny.

Unionists, including Britain's three main political parties, say the United Kingdom is stronger if it stays together and that Scottish independence would bring significant financial, economic and political uncertainty.

"I can see why Scottish people would want more say in their lives," said Jim O'Neill, the English-born former chairman of Goldman Sachs Asset Management. "But from where I sit, it doesn’t really make a lot of sense nationally.”

(1 US dollar = 0.6194 British pound)

(Additional reporting by Sarah Young, Kate Holton, Kylie MacLellan, Patrick Graham, Matt Scuffham and Atul Prakash)