The silhouette of a woman walking past the Cathedrale Marie-Reine-du-Monde in Montreal, Quebec, Canada
Quebec has the largest government debt of any Canadian province when measured relative to the size of its economy © Bloomberg

For those Scots still wavering about how to vote in next week’s referendum, First Canadian Place in Toronto is a concrete lesson in how money reacts to secession, or even the threat of one.

In 1976, the separatist-minded Parti Québécois beat the Quebec Liberal party in the province’s election. The next day, “the Brinks trucks [armoured vehicles for transporting cash] were rolling down the highway” and out of the French-speaking province, said Joe Martin, director of the Canadian business history programme at Toronto university’s Rotman School of Management.

After the election, the PQ steered Quebec towards its first independence referendum in 1980. In the end the motion was voted down – 59 per cent to 40 per cent – but the financial sector’s sentiment towards Quebec never recovered.

Most of the money that fled the province made its way to Toronto, capital of Ontario, which by the early 1980s had replaced Quebec’s Montreal as Canada’s most populous city. Which is why First Canadian Place is today the de facto headquarters for Bank of Montreal, even though the lender is registered in its namesake city.

More of Canada’s largest financial institutions shifted their bases to Toronto and now inhabit the towers that rise over Bay Street, the heart of the sector. By 1980, only one of Canada’s largest eight financial institutions by assets – National Bank – was still headquartered and managed from Montreal, according to Mr Martin. That had fallen from five out of eight, including Bank of Montreal, Royal Bank of Canada and Sun Life Financial.

“Montreal never recovered – there is no financial sector in the city,” said Reuven Brenner, a professor at McGill University’s Desautels Faculty of Management. “When critical masses of talent move out . . . the [affected] places do not recover.”

As with Scotland, investors question whether Quebec is financially viable on its own. The province is the largest recipient of the federal government’s equalisation payment system, established in the 1950s to spread revenues from wealthier provinces to poorer ones.

Quebec also has the largest government debt of any Canadian province when measured relative to the size of its economy, according to a March 11 report by the Fraser Institute, a Canadian public policy think-tank.

This prompted warnings that are now familiar to the Scots. In a paper he wrote ahead of Quebec’s second independence referendum in 1995 – in which the separatists came within an ace of victory with 49.22 per cent of the vote – Prof Brenner said that under these conditions the government of a province aiming for independence would need to commit to cuts to services, less regulation, lower taxes and privatisation. Otherwise, it would face much higher interest rates on outstanding debt.

“Countries can declare themselves being ‘sovereign’,” Prof Brenner wrote in the paper, entitled “Financial Options for Countries Wanting a Divorce”, the conclusions of which he says are applicable to Scotland today. “[But] if they do not have access to credit, sovereignty becomes a costly illusion.”

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