On September 18th, Scotland held a referendum on their independence. 55% of voters chose to remain a part of Britain. This was a relief to those tied to Scotland's economy, because a very close vote would have left some uncertainty about Scotland's future. Uncertainty in a country makes investors weary of putting their money there. If Scotland would have voted to become independent, or if there was the chance of another referendum, Scotland's economy would have taken a downturn due to this uncertainty. Some businesses such as the Royal Bank of Scotland even threatened to move their headquarters outside of Scotland if they became independent.
The fact that there was a 55% majority vote in favor of remaining part of Britain saved the potential downfall. Many people predicted the vote would be much closer, and since Scottish nationalist leader Alex Salmond stepped down, there is little fear of another referendum. This calms the fears of uncertainty in their economy and gives markets the confidence to stay.
Since the ECB doesn't have as much control of the EU economy as the Federal Reserve has in the United States, and there is current fear of deflation in the EU economy(1), I think creating a hiccup in investing is not something the EU would want. Economically speaking, I think it is a good thing that Scotland didn't separate from Britain at the moment, as that could indirectly lead to more serious problems.
http://money.cnn.com/2014/09/19/news/economy/scotland-vote-quebec/index.html?iid=SF_E_River
(1) http://www.economist.com/blogs/graphicdetail/2014/08/european-economy-guide?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
I agree that now definitely wasn't the time for Scotland to break from Britain, and I find it interesting that the financial sector was so vocal about their dislike for this idea. You mention that the vote was nowhere near as close as expected, I wonder if that is because the Scottish were worried about the fate of their economy. What does this mean for Scotland if a few financial powerhouses can essentially decide the fate of the country?
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ReplyDeleteI'm glad Scotland stayed in the the Uk because from an international business standpoint there could have been a huge fallout. The pound probably would have gone down because almost all of Bitains oil industry is located in Scotland and confidence in Britain would be lost with Scotland leaving, causing panic in Europe. Luckily this didn't happen and the potential fatal fallout didn't happen.
ReplyDeleteThe recent referendum in Scotland proposes many concerns for the future of Scotland given the recent vote to stay a part of the British Monarch. One question that arises is what were the demographics of the voters to stay a part of the monarch? If the voters for the split were of a younger demographic, does this mean that in years to come there will be a significant effort to separate from Britain again? What does that mean for the fate of Scotland in a financial sense? For now it seems as Scotland will remain stable, but the real question is, is this just the start of an unpromising future for Scotland.
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