UK stays “United” - stars aligned for the Union

Just a few days ago, Scotland voted “no” and rejected the opportunity to gain independence from the United Kingdom. The voting results, announced in Scotland early Friday, actually came fairly close as it showed 55% of voters against independence and 45% in favor. As a result, one of the longest unions, dating back to 1707, will stay united and it seems that the economic and financial outlook of both nations remain quiet positive.

By staying together, the Scots will continue using the British Pound as their currency. This news seems to bring a great amount of relief on the financial markets as the pound rose sharply against the dollar, euro, and yen on Friday; this is probably due to the fact that the downside risk on both U.K. and Scotland growth has been mitigated, as the economic recovery that has already started will continue to gain momentum. In addition, the “no” vote also indicates that the Royal Bank of Scotland and Lloyds Banking Group, Scotland’s two largest banks, will no longer move their headquarters to England. Given the weight of the banks in the FTSE 100, UK equities have soared, as depositors will continue to hold their money within the banks.

On the economic front, Scotland is aligned for recovery. Rather than acting as an independent nation and taking hold of numerous economic risks, the Scots will continue to be backed by one of the greatest unions in the world. As integrated nations, both Scotland and the U.K. government will be able to rely on each other for financial and economic support; businesses, as well, will be able to use each other’s resources and invest easily among one another, increasing the recovery rate for both nations. Overall, from this view, it seems that a “no” to breaking up was the correct move, as both Scotland and the U.K. will continue to benefit greatly through their long-lasting union.

--Neil Shah