Long-suffering fans of Scottish rugby are reminded at every match that, 700 years ago, the English army was sent home tae think again. But, this week, Scots have been told that if they vote for their wee bit of hill and glen to become independent, it is their banks and insurance companies that they will send south.
The prospect of losing thousands of bankers might have been popular a few years ago, but is unlikely to help the Yes camp in the final days of campaigning. After a poll suggesting opponents of independence are now six percentage points ahead, and aided by more warnings from Bank of England Governor Mark Carney, markets began to unwind trades based on the break-up of the UK.
Betting on the merits of one poll over another is foolish, at best. However, the scale of sudden panic about the Scots vote – which few investors saw as a threat to asset prices until this month – means traders were looking for an excuse to reverse. The pound had fallen 6.6 per cent from its peak, a chunky drop, and options markets looked as though they had been attacked with a claymore as investors rushed to hedge against further drops.
From the lows on Wednesday, though, the pound is now up more than 1 per cent – its biggest recovery since decline set in at the start of July. Signs of Scots fears in share prices also unwound somewhat, with Scottish companies among the best performers in a falling market.
But the size of the fall should be put in context. The pound fell further and faster early last year, when a triple-dip recession was feared (even the double-dip recession was eventually revised away). Also, compared to the spread of two-year gilts over US Treasuries – with which the pound usually moves closely – Scots fears may account for only about 3 cents of sterling’s fall (although this can be measured different ways). If, however, Scots decide to do or die on Thursday, as a previous anthem had it, the pound could head south faster than King Edward II.