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Asset managers, investors and pension savers are moving billions of pounds out of Scotland, according to industry executives, amid rising concerns about the financial consequences of a Yes vote in next week’s independence referendum.
Multrees Investor Services, a manager of bank accounts for the wealth management industry, said it alone had moved hundreds of millions of pounds on behalf of several wealth managers. “They’ve all been taking action,” said Chris Fisher, Multrees’ chief executive. “If our clients are doing it then other financial services companies are doing it as well.”
Douglas Connell, senior partner at Turcan Connell, one of Edinburgh’s best known legal firms – which also has a wealth management arm and specialises in handling the affairs of the well-heeled – said: “We’re extremely busy at the moment. There is an unprecedented level of questions. There is almost a frenzy [among clients].
“The big question is, ‘Is my cash safe in a Scottish bank?’,” he said. Clients were “concerned that there could be some kind of controls” put on funds in Scottish banks. They were worried that “some kind of axe might come down” immediately after the referendum. He said such worries were unfounded.
In a further sign of nerves, “exit clauses” are being inserted into commercial property contracts in Scotland to allow buyers to scrap deals or renegotiate prices if voters opt for independence, according to leading advisers to the sector.
With opinion polls indicating the two sides are neck and neck, Mark Carney, governor of the Bank of England, warned that a currency union between England and an independent Scotland would be “incompatible with sovereignty”.
His comments mark a significant hardening of his position against sharing the currency and come as the leaders of the main Westminster political parties scramble to regain the initiative and prevent the break-up of the 307-year-old union.
David Cameron and Ed Miliband, the Labour party leader, are to cancel their weekly House of Commons question time duel to campaign in Scotland on Wednesday along with deputy prime minister Nick Clegg.
The decision to suspend hostilities reflects mounting concerns in Whitehall and the City about the implications of a Yes vote. Wealth managers report clients moving deposits out of Scottish banks, and pension funds out of the stock market and into cash. One independent financial adviser said a client had shifted close to £1m out of stocks into a safer asset.
“Clients are concerned about the unknown,” said Claire Walsh, chartered financial planner at Aspect 8, the independent financial advisers. “Some of them are elderly and nearing retirement and are worried about their assets.”
Shares in Scottish-based companies rebounded on Tuesday after sharp falls the previous day in the wake of a Sunday Times/YouGov poll that gave the Yes camp a narrow lead for the first time in the campaign. But the pound was flat and 10-year gilt prices fell further on Tuesday, briefly pushing yields up to 2.52 per cent – close to a one-month high – before they retreated slightly.
Number 10 itself will fly the Saltire until the referendum is over, something Mr Miliband has also urged Labour councils to do. Mr Cameron is expected to announce shortly who he intends to chair a cross-party convention on the transfer of new powers to Holyrood if there were to be a No vote.
“There is a lot that divides us – but there’s one thing on which we agree passionately: the United Kingdom is better together,” the three main political party leaders said in a joint statement. “Our message to the Scottish people will be simple: ‘We want you to stay’.”
One Scottish asset management executive said that UK financial regulators were “quietly reaching out” to institutions to discuss their contingency plans for a potential Yes vote on September 18.
Big Scottish financial institutions, including Royal Bank of Scotland and Lloyds Banking Group, have said they are concerned about the consequences of a Yes vote and are working on contingency plans. Standard Life is one of the few to say it may move its domicile to England if Scotland becomes independent.
Barney Reynolds, a partner at Shearman & Sterling, said: “For firms to continue to be under UK supervision, their place of business and management generally would have to be in the UK. This will tend to create a gravitational pull on Scottish firms to relocate much of their infrastructure to the UK, particularly for retail-oriented businesses.”
Additional reporting by George Parker, Sam Fleming, Anne-Sylvaine Chassany and Elaine Moore