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Odds Of An Independent Scotland: Lay On McDuff.

RiskWestern EuropeBlog

Today, Scotland votes on its future: a future potentially outside the United Kingdom. Do we yet understand the potential impact on business?

 

For most of the referendum campaign, the polls have described an increasingly divided society. Where independence was once considered a pipe dream, surveys now routinely show statistically insignificant splits between the two sides.

 

Some polls have shown a slight lead for the separatist camp.

 

The final outcome will depend on the large ‘undecided’ group of voters. Increasingly commentators, analysts and other sage observers are classifying themselves as part of the ‘don’t know’ group, as many believe the result is too close to call.

 

As with the rise of Islamic State and a Russian invasion of Ukraine, a Scottish ‘yes’ vote may be another instance this year where experts are embarrassed by an ‘unexpected event’ taking the world by surprise. Alternatively, when turning to gambling markets, generally the more reliable of oracles, predicted chances of independence equate to 20%. Betfair, one of the largest betting sites, is already paying out on ‘no’ bets.

 

Today we are launching our annual Category Planning Guide (available to Procurement Leaders members here), which involves forecasts from over 400 buyers. None of these mentioned Scottish independence as a worry. The Middle East: Yes. Ukraine: Yes. Scotland: Not a concern.

 

Yet, earlier this week, the International Monetary Fund listed the three issues above as the major inhibiting factors on world growth. The uncertainty about the future of one of the world’s largest economies will have repercussions throughout the region.

 

One of the major issues relates to currency. Simply put, the currency of an independent Scotland is still unknown. Entry into the euro has been ruled out. Devising something new is undiscussed. Currently, the ‘yes’ lobby insists it can retain the use of the pound. A point which the Westminster parties pointedly refute.

 

Alan Greenspan, the former chair of the US Federal Reserve, has waded into the debate by stating that "there’s no conceivable, credible way the Bank of England is going to sit there as a lender of last resort to a new Scotland”.

 

From a procurement perspective, this uncertainty will cause major headaches. What currency will we be paying suppliers? Not even the suppliers know.

 

Will independence cause capital flight? Will Scottish suppliers face cash-flow crises?

 

What of the new regulatory regime? Will Scotland convert itself into a Scandinavian-style social democracy and create more onerous employment red tape for business?

 

Should a ‘yes’ vote be returned, it should take some 18 months of negotiation to secure Scotland’s formal independence. But, throughout this time, businesses can expect to experience a period of risk and uncertainty.

 

All this, at the moment, still depends on the final roll of the dice.

 

Procurement Leaders members can access the new Category Planning Guide here.

Jonathan Webb
Posted by Jonathan Webb