Why Scottish capital is taking  flight to beautiful south

Shifting cash a reasonable response to a worst-case scenario

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“We’re doomed!” was the catchphrase of gloomy Scotsman Private Frazer in TV sitcom Dad’s Army. It always worked best as a deflating punchline to the wilder plans of the platoon captain, a plump, officious little man. Delivered in the form of capital flight, small businesses have used the line as a riposte to strengthening support for the independence campaign led by Alex Salmond.

Earlier this month, UBS economist Paul Donovan prophesied a Yes vote would bring a “significant risk” of deposits heading south. In fact, the move had already begun. One chief executive tells Lombard she shifted £300,000, the entire cash float of her company, to England starting in May. Contacts at trade bodies and networking groups report a minority of members have done the same.

Scottish heritage does not always inspire a sunny disposition, as you will know from reading this column. Are the Private Frazers of the Auchenshoogle Chamber of Commerce overreacting?

Politicians and other professionals with good pensions would mostly say Yes. Even if Scotland votes to secede next week, it would stay in a voluntary currency union during lengthy exit negotiations. Banks such as RBS would likely move to England rather than rely on the Scottish government as lender of last resort.

Small business owners know they can lose a lot of money listening to well-pensioned professionals. These include bankers who encouraged them to leverage up ahead of the financial crisis then cut off credit during it.

When the firm you have built is also your retirement fund, you do not take chances with it. Lodging your cash at Barclays’ Berwick branch is a reasonable response to the worst-case scenario of capital controls if currency talks collapse.

Jeegar Kakkad of ADS, an aerospace and defence industry body, says Scottish entrepreneurs who have opened English accounts may move their company’s registrations south too. Fearing accusations of disloyalty, few will speak openly. But they cannot be blamed for doing what large corporations also plan to.

Uneasy trews

Are tartan shorts a good idea? The wearable kind rarely are, particularly if you have the legs of an Edinburghian actuary rather than those of a Skye caber tosser. But it could make more sense to sell shares in Scottish businesses forward in hopes they will drop in value.

McEquities retreated alongside sterling on Monday morning. They included Lloyds, RBS, Weir, the pumps group, and Babcock, operator of the Rosyth naval dockyard.

Short sellers are a dauntless bunch. Some even try to enlist Lombard in their raids. Resulting emails urging negative coverage would be more effective if their self-serving character was less obvious. They typically read: “Terrible what’s going on behind the scenes at XYZ Plc. Shares will take a pounding, I hear. Warm regards, Anonymous.”

But curiously, there appears to be little shorting of Scotland-linked stocks. One of the most exposed companies is Aberdeen Asset Management, where short interest is equivalent to 6 per cent of the free float, according to Markit. And that is more likely to reflect a vote of no-confidence in emerging markets, in which Aberdeen invests, than in an independent Scotland.

Are shorts missing a trick? Or just evading data gatherers?

Aberdeen could meanwhile avoid some grief by rebranding, perhaps as Bow Lane Asset Management (BLAM!) in reference to a street near its London HQ.

Presuming Ed

Fending off a challenge to a venerable institution often boils down to mobilising the No vote. That applies to private equity group Electra as much as to the UK.

Activist investor Edward Bramson, who holds 19 per cent via his vehicle Sherborne, wants fellow shareholders to vote Ian Brindle and himself on to the board, prior to a strategic review. The move resembles his intervention at Foreign & Colonial Asset Management in 2011. He won that vote, became chairman and cut costs before F&C was bought by Bank of Montreal for £708m.

So it may help the silver-haired activist that funds deemed supportive during the F&C fight have skin in this game too. Fidelity and Aviva reputedly own about 5 per cent of Electra between them.

M&G meanwhile holds about 8 per cent. The Pru’s fund manager never declared for Mr Bramson back in 2011. But delve into M&G’s voting record and you will find it backed every motion he brought, including electing him and Mr Brindle.

A voting bloc of 32 per cent would make Mr Bramson’s tilt at Electra much stronger than it had at first appeared.

jonathan.guthrie@ft.com

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