An interesting study has been performed which shows that people provided with more information are more inclined to vote Yes. I had not long finished reading that when I checked how the BBC are covering events and found that the referendum had prime slot with the headline ‘Scottish independence: Pound falls after referendum poll’.
The article starts with: ‘The value of the pound has fallen in the wake of an opinion poll which suggested the pro-UK campaign had lost its lead ahead of the Scottish independence referendum. [A YouGov poll showed Yes at 51% yesterday]
The article goes on: ‘Sterling fell by about 1.3% against the US dollar to a 10-month low of $1.61.’
You might expect some context to analyse this to follow but remarkably not. Some context would have been useful, especially since the BBC (and the rest of the UK mainstream media) have failed to give any notable coverage to the 1.8% drop in the pound (GBP) to the US dollar (USD) that occurred from the end of August to the start of September. In fact looking at the GBP to USD exchange over the last year shows that variation is business as usual:
However there is a second point of analysis that is missing from the media’s coverage of this story and that is that there would be no impact on the GBP currency if the UK government stepped back from their Project Fear and announced that they will establish a formal currency union. As I wrote about previously, one of the main reasons that a formal currency union is proposed is to ensure that the rest of the UK remains stable while losing ~10% of their economy and one of the areas that contributes significantly to the GBP balance of payments. The No campaign obviously won’t pledge a currency union before the referendum but as the leading economist Anton Muscatelli outlined in this excellent Financial Times article, rejecting a currency union after a Yes vote ‘would be tantamount to economic vandalism’.
Who shares what?
However, instead of any context or analysis the BBC article moves on to say:
‘On Monday morning, shares in Scottish-based firms dominated the top fallers on the stock market.
Edinburgh-based Standard Life fell 3%, Royal Bank of Scotland slipped 2.4% and Lloyds Banking Group, which owns Bank of Scotland and Scottish Widows, dropped 2.7%. Their share prices recovered slightly later in the day but remained in negative territory.’
After months of installing fear into the minds of Scottish citizens about the ‘cataclysmic’ impact of a Yes vote, this was obviously an attempt to make the Scots think that the possibility of a Yes vote is having a damaging effect on Scottish companies.
Now as anyone who has actually been campaigning in Scotland knows – people provided with more information are more inclined to vote Yes – and so the possibility of a Yes vote has been present since the referendum was announced so it is interesting to look at how the share prices have moved over the last year.
Standard Life have actually had a fantastic year – their share price is actually up 22.21% from last September. The Standard Life share price had a 9% spike from the 3rd to the 4th of September following the sale of Canadian firm Manulife Financial Corporation, and reductions are fairly commonplace after such spikes on the stock market so the 2.42% fall today (not 3% as reported on the BBC) may well have happened even another poll hadn’t been published on the Sunday – to claim otherwise is pure speculation.
The RBS share price isn’t quite so positive over the last year but still shows an overall growth of 2.06% over the last year. The range in the share price over that time is from a low of 291.60 (April 2014) to a high of 387.50 (October 2013), which represents an 18% swing. Again, with that context today’s 1.3% drop to 342.5 doesn’t seem so bad (again, the BBC overstated the drop but this time by more than 1%). Similarly, Lloyds Banking Group’s drop was overstated by the BBC with their closing share price showing a 2.43% drop rather than the 2.7% reported – their story isn’t too dissimilar to that of RBS.
It would be insular and parochial to only look at UK companies though – so context from international firms is always useful for comparative purposes. The largest bank in Denmark – Danske Bank – has seen a 39.78% increase in their share price over the last year. It would seem that functioning as a financial institution in an independent country equivalent in size to Scotland has not prevented growth for them.
Ultimately though, share prices move around and that is what keeps so many traders in employment around the world. It is shameful that the British media are trying to use the events of one fairly standard day on the stock market to try and influence Scotland’s constitution.
Being informed helps to overcome the efforts to scare the electorate – the referendum has sparked a process where the Scottish people are engaging in politics in a way that I’ve never seen. Imagine the possibility of going into our first election after a Yes vote and the level of expectation that would go with this engagement – it is an extremely exciting prospect for the nation.