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UK financial shares were up sharply after the market opened on Friday following the Scottish referendum result, although the City of London warned that serious questions remained unresolved.
RBS shares were up 3.5 per cent at 366p, Lloyds shares rose 1.7 per cent to 77.2p and Standard Life shares were up 1.7 per cent at 424p.
The No vote has come as a particular relief to many in the financial services industry, and its investors. Last week both RBS, the majority state-owned bank, and Lloyds announced plans to move their registered offices to London if Scotland voted for independence. Edinburgh-based insurer Standard Life had warned it could move large parts of its operations to England.
RBS said: “Following the result it is business as usual for all our customers across the UK and RBS.”
The RBS board met on Friday morning to discuss the referendum result. One board member said: “We won’t now look to re-domicile,” adding that the bank would “still need to do some re-plumbing” to cope with the ringfencing of its UK retail operations under the new regulatory regime drawn up by Sir John Vickers.
Top managers at both Lloyds and RBS expressed relief at the referendum outcome on Friday. One said: “The costs of moving towards a separate Scottish state would have been substantial. Another risk removed.”
Another said: “We always thought the vote would be a (small) no, but obviously had to have a contingency plan, with 18 months to execute it. Now the status quo remains.”
Standard Life said: “We recognise that further constitutional change is very likely following the clear result of the referendum. We will consider the implications of any changes for our customers and other stakeholders in our business to ensure their interests are represented and protected.”
National Australia Bank and its Scottish member Clydesdale Bank said that it was “business as usual”.
Martin Gilbert, chief executive of Aberdeen Asset Management, said: “UK investors will welcome a reduction in the uncertainty of recent months.”
The government insisted in the lead-up to the referendum that it would not be making contingency plans for a “yes” vote. The exception to that was the Bank of England, which was on standby for any signs of panic among savers and depositors in Scottish financial institutions.
On Friday morning, the BoE made no comment following the verdict, even as other parts of the City greeted it with open relief. The central bank had been ready to offer emergency liquidity resources to banks north of the border if there had been signs of deposit flight.
There had been reports of some movements of capital out of Scotland in the run-up to the referendum. To the extent this happened, it may not reverse immediately, cautioned Neville Hill, chief European economist at Credit Suisse. “One lesson from Europe is deposits tend to run away and walk home – there is a degree of inertia,” he said.
“For the Scottish banks it has been stressful and I think you will see them re-domicile anyway in the medium term,” said Philippe Bodereau, a fund manager at Pimco who invests in banks. “The result of the Yes vote is high enough and will make it hard to permanently bury independence talk and the prudent avenue for a board should be to redomicile.”
The City of London welcomed Scotland’s decision to remain part of the UK.
Mark Boleat, chairman of the policy and resources committee at City of London Corporation, said: “This is a vote for certainty and stability, enabling businesses to plan effectively and individuals to feel certainty about their financial decisions. It is also a vote in favour of the future of the UK – stronger together, working for economic growth, EU reform and a financial centre ripe for innovation and open for business.”
But while the “No” vote removes the burden of uncertainty around key concerns such as currency and regulation, as discussion on devolution progresses the focus will turn to areas such as taxation.
Peter Wallace, head of financial services at EY Scotland, said the impact of any further legislative changes, particularly those around taxation, would move up the agenda. “Change is coming to Scotland regardless of today’s result in the shape of the Scotland Act and the timetable of additional powers proposed by the Better Together campaign.”
Christopher Price, head of financial services for UK & Ireland at EY, said: “There’s no doubt the referendum has unsettled investors. While the “no” vote should stymie any panicked reactions, investors and those who run businesses are now looking for long-term policy certainty. Depending on what follows today’s result, there may still be implications for financial services in Scotland.”
Howard Shore, executive chairman at Shore Capital, a brokerage, said: “If we end up with devo max, there will [be] a much more regional form of government in the UK. The West Lothian solution comes on the table whereby Scottish MPs won’t be able to vote on a whole range of things affecting England. That’s a good thing.”
Reporters: Harriet Agnew, Martin Arnold, Sam Fleming, Sarah Gordon