Scottish independence would be highly contagious

"The Catalans and Basques of Spain will be watching carefully; and further afield, separatists in Flanders, northern Italy and elsewhere will be jumping up and down with joy if Scotland votes for independence"

By InvestSMART source · 10 Sep 2014

By InvestSMART source ·
10 Sep 2014

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If Scotland votes for independence on September 18, a possibility which now looks more likely, it would be an event of such magnitude that too few in industry and finance have fully grasped.

The British pound’s slide has only just begun and it will fall further if the Scottish nationalists triumph. It will then continue to slide when the full scale of the political and constitutional chaos in Westminster is laid bare, and as the long and nasty negotiations between London and Edinburgh continue. But, while the pound will be the big loser in the short term, and has already plummeted from $1.71 in early July to $1.61 today, the euro will be next in the line of fire as the independence mania spreads. Spain in particular would be under huge pressure as a result and could easily be the next European country to split.

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Frequently Asked Questions about this Article…

What impact would Scottish independence have on the British pound?

If Scotland votes for independence, the British pound is expected to slide further. The initial drop has already been observed, and continued political and constitutional chaos could exacerbate the situation.

How might Scottish independence affect the euro?

Scottish independence could trigger a broader independence movement across Europe, putting pressure on the euro. Spain, in particular, might face significant challenges, potentially leading to further instability in the eurozone.

Why is the potential for Scottish independence causing concern in financial markets?

The potential for Scottish independence is causing concern because it introduces significant uncertainty and potential instability in both the British and European financial markets, affecting currencies like the pound and the euro.

What are the potential consequences of Scottish independence for the UK?

Scottish independence could lead to political and constitutional chaos in Westminster, complicating negotiations between London and Edinburgh and potentially weakening the UK's economic position.

Could Scottish independence influence other regions in Europe?

Yes, Scottish independence could inspire other regions in Europe to pursue their own independence movements, with Spain being a notable example where similar pressures might arise.

How has the British pound reacted to the possibility of Scottish independence so far?

The British pound has already experienced a decline, dropping from $1.71 in early July to $1.61, as the likelihood of Scottish independence has increased.

What are the broader implications of Scottish independence for investors?

For investors, Scottish independence could mean increased volatility in currency markets, particularly affecting the British pound and potentially the euro, as well as broader economic uncertainty in the UK and Europe.

How should everyday investors prepare for the potential impact of Scottish independence?

Everyday investors should stay informed about developments and consider diversifying their portfolios to mitigate risks associated with currency fluctuations and political instability in the UK and Europe.