All pundits who over the past few months have been saying the possibility of Scottish independence as a result of the September 18 ballot, is at best a pipe dream got a rude wake up call overnight, when Scottish YouGov poll for the Sunday Times put the “Yes” (for independence campaign) on top for the first time since polling began, with No below the majority cutoff line for the first time, at 49, when undecided voters are excluded, and even when including undecideds “Yes” is still ahead by two points at 47-45. As the Spectator reports, “in the space of four weeks, “No” has blown a 22-point lead.”
According to Bloomberg, “the shift to an outright lead for supporters of independence may further roil financial markets after the pound weakened last week when the pro-U.K side’s support narrowed to six percentage points.” Granted, today’s news may be GBP-negative, but Bloomberg seems to still operate under Old Normal assumptions whereby any news, bad or gad, is anything but great for stocks. Expect the S&P to hit new all time highs on this latest development which will be promptly “priced in” and spun as pent-up reunification.
The usual commentariat, which until recently was swearing the Yes vote has zero chance, is stunned :
“For a positive message to catch up so much in a month is totally unprecedented,” said Matt Qvortrup, a senior researcher at Cranfield University in England and author of “Referendums and Ethnic Conflict.” “This is pretty revolutionary stuff in referendum terms. We’re ringside to history.” The Sept. 18 ballot on Scottish independence is dominating the U.K. after door-to-door campaigning on both sides intensified last week and as traders and investors no longer rule out a dramatic victory for nationalist leader Alex Salmond.”
Others were more direct and to the point:
Scottish poll reflects world-wide disillusion with political leaders and old establishments leaving openings for libertarians and far left.
— Rupert Murdoch (@rupertmurdoch) September 6, 2014
The Spectator’s Fraser Nelson had this to say:
Make no mistake, the UK government will now be on full panic mode. This eclipses everything: the country is 12 days away from dissolution. We’re seeing an almost perfect rerun of what happened in Quebec in October 1995 when the ‘yes’ pulled into a lead at the last minute. Then, Canadians (who had ignored the debate until then) suddenly took notice, realising that their country was falling apart. Seven days before the poll, a massive unity rally in Montreal was organised (details here) by a fisheries minister acting on his own initiative. God knows such initiatives are needed now.
UK politicians, naturally, were not happy, starting with the head of the UK Treasury, Chancellor of the Exchequer George Osborne, for whom any change from the status quo is very much unwelcome:
Chancellor of the Exchequer George Osborne said a program for increased devolution to Scotland if it votes No, offering Edinburgh more control over taxes, public spending and social policy, will be announced in the “next few days” as the London government responds to the shift in the polls.
“It’s clear that Scotland wants more control over the decisions that affect Scotland,” Osborne said in a televised BBC interview. “The timetable for delivering that will be put into effect the moment there is a ‘no’ vote in the referendum. Then Scotland will have the best of both worlds. They will both avoid the risks of separation but have more control over their own destiny, which is where I think many Scots want to be.”
Osborne also reiterated his opposition, which is shared by all major parties in Westminster, to currency union with an independent Scotland. “No ifs, no buts, we will not share the pound if Scotland splits from the rest of the U.K.,” he said.
His predecessor quickly chimed in: enter Alistair Darling.
‘The polls may conflict, but the message I take from them is clear: If you want Scotland to remain part of the UK family you have to vote for it on 18 September. Separation is forever. These polls can and must now serve as a wake-up call to anyone who thought the referendum result was a foregone conclusion. It never was. It will go down to the wire. Now is the time to speak up and speak out.
‘We are hitting the streets, knocking on the doors, making the calls in unprecedented numbers and we are hearing the people of Scotland respond positively to our vision of Scotland securing the best of both worlds. That means more powers for Scotland without taking on all the risks of separation.
‘We relish this battle. It is not the Battle of Britain – it is the battle for Scotland, for Scotland’s children and grandchildren and the generations to come. This is a battle we will win.’
It only got more panicky from there:
With campaigning in its final days, the opposition Labour Party is trying to keep its supporters onside in a traditional heartland and vote against independence. Former Prime Minister Gordon Brown, now a Labour legislator, will tour the country making the case for the union.
“I want to share our resources with the rest of the United Kingdom, and that will mean better pensions, better health care, more jobs and better security,” Brown, a Scot, said in an interview with Sky News. “Whatever government is in power temporarily, you’ve got to look at the long term picture. You’ve got to look 50 years ahead, 100 years ahead. This is an irreversible decision.”
But perhaps realizing that dazzling them with glass beads and cheap promises won’t work, UK’s Prime Minister went “all the way” and pulled a nuclear Hank Paulson, threatening Scotland with outright death and destruction if it votes to secede. From Bloomberg:
Scotland will be more vulnerable to terrorist attacks in a “very dangerous and insecure world” if it votes for independence on Sept. 18, U.K. Prime Minister David Cameron said.
Being part of a union gives Scots the protective benefits of being part of a larger country, Cameron told reporters at the end of the North Atlantic Treaty Organization’s summit in Newport, Wales, yesterday.
“With terrorist threats and other threats, isn’t it better to be part of a United Kingdom that has a top-five defense budget, some of the best intelligence and security services anywhere in the world, that is part of every single alliance that really matters in the world in terms of NATO, the G-8, the G-20, the European Union, a member of the security council of the UN?” Cameron said. “All those networks and abilities to work with allies to keep us safe. Isn’t it better to have those things than separate yourself from them?”
Because how else can Scotland protect itself than by aligning with the nation that, together with the US, provided weapons to these “terrorists” in the first place.
And while everyone else demanded a continuation of the status quo, and is “stunned” at the Scottish people for not appreciating the “clear benefits” that a union provides, one person who was absolutely delighted was Scottish National Party leader Alex Salmond who said he expects more the 80 percent turnout in independence referendum on Sept. 18 after a poll for the first time gave a lead for his party’s ‘Yes’ campaign. “We’re encouraged by the clear panic in the ‘No’ campaign,” Salmond said in a BBC interview.
“They’ve failed to scare the Scots, now they’re trying to bribe us. That won’t work either.”
But they’ll keep on trying: just recall “Scottish Independence ‘Yes’ Vote Is A “High Risk” Event, Citi Warns.” Sure enough, here comes Citi with the postmortem released moments ago, with a note titled: “Sterling Is Set for Negative Surprise After Scottish Poll”
- Recent history would suggest that a move for the pound toward 1.56 vs USD or lower cannot be excluded if Scotland leaves the union, Citigroup writes in client note today.
- Outright lead in pro-independence campaign in latest YouGov survey will keep investors anxious about the outcome of the referendum on Sept. 18
- Referendum authorities may conduct more polls in remaining week and a half; fact is, of the 86 polls conducted since 2012, only two put ’’Yes’’ vote in the lead
- Better U.K. data this week, such as July industrial and manufacturing production, may be of little comfort
- Carney testimony to Treasury committee hearing on Sept. 10 could highlight political and economic risks for GBP from the referendum
And from Berenberg:
- Risk that Scotland will vote for independence is real and rising; recent movements have been further and faster than anticipated, Rob Wood, U.K. economist at Berenberg writes in client note.
- Still expect a no vote; yes campaign lead is within margin of error and latest poll is not matched in other polls, could be an outlier
- Scotland is re-running the 1995 Quebec independence referendum, which went down to wire before ending in tight vote against splitting from Canada
- A Yes to independence could cause serious short-term pain over uncertainty on currency, EU status; Scotland may be forced to austerity
- May raise risk of U.K. exit from EU without pro-EU Scotland
- A close No vote would keep alive chances of another referendum in 5-10 years, could mean additional powers for Scotland, kickstarting changes to U.K. regional governance
Of course, everyone knows that the end result of the “vote” will be arbitrated by the proverbial, if not literal Diebold, which we somehow doubt will allow such an earth-shattering outcome as Scotland being allowed to determine its fate, to take place. Because if they can, suddenly it becomes an option for the rest of Europe, a continent where as Mario Draghi has explained time and again, there is far too much political capital invested in allowing the peasants to decide their own fate.
In the meantime, however, what better excuse than to grab the popcorn, sit back and enjoy an all-time classic.