What a No Vote Means for Markets

Scotland has voted against independence, but the future of the UK economy still faces uncertainty as Westminster hands over increased powers to the Scottish Parliament

Emma Wall 19 September, 2014 | 9:45AM
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Scotland has voted no to independence, choosing to stay part of the United Kingdom. The independence referendum was won by the no campaign, with 55% of the votes.

Sterling has bounced off the back of the good news – as have share prices in the big Scottish banks, which had vowed to move south of the border should the yes vote prevail. But the debate is not over, and there is still uncertainty as to what this result means for the UK economy and the stock market.

In a bid to win over voters and cement the 300-year-old union Westminster promised the Scottish Parliament greater powers and more money to support the domestic economy. These pledges will now have to be honoured, and this will have an impact on the rest of the UK and its continued economic recovery.

Here, two investment experts give their views on how the public purse and your portfolio may be affected.


Paras Anand, Head of European Equities, Fidelity Worldwide Investment

We have argued that assessing the potential impact of the Scottish vote on markets requires two things: the first is to understand the point above and the second is to look at referendum in the context of the UK political environment more broadly.  In this context we could find that the mood surrounding the outcome of the vote may be short-lived as the focus turns quickly to the potential details and consequences of ‘devo max’.  

Additionally, given the sense as we approached the referendum that the outcome was impossible to call, this perspective will carry over to the upcoming general election and, in the case of a Conservative government prevailing, the referendum on EU membership.  Hence, we could expect to see and extended period of sterling weakness, especially relative to the US Dollar.  

This, we believe would be a welcome development for the UK corporate sector overall given the large proportion of revenues and profits that are earned overseas and hence supportive for the markets overall.  Moreover, whilst this atmosphere of political instability dominates, it is difficult to see how we will experience anything more than modest increases in short rates over the coming years which should, at the margin, be beneficial for the domestic economy overall.


Alan Wilde, Head of Fixed Income, Baring Asset Management

Sterling has taken the bulk of pressure and a recovery to $1.65 or so seems plausible though upside potential may be limited as sterling has actually been stronger than other major currencies such as the euro and Yen as the US dollar has rallied hard.  For Gilts, which have outperformed US Treasury bonds, there could counter-intuitively be some downside with the Referendum out of the way: one consequence of a Yes vote was that Bank of England Governor Carney was expected to go slowly tightening UK rates.  This outcome may now lead markets to focus back on growth and conclude that the UK economy needs some modest restraint and that the Bank will be ahead of the US Federal Open Market Committee raising official rates.

Once the dust has settled, attention will turn to the political consequences of such a long and divisive Referendum campaign.  Concessions by all major political parties to sweeten a No vote give more devolved powers to Scotland and greater latitude to control its own budget.  Already there are some Westminster MPs who are unhappy that such promises have been made and it is to be expected that this issue will be very sensitive the closer we get to the May 2015 UK General Election.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar