Finance and the Referendum

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:

pound-to-dollar

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.

Standard Life 080914

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.

About stuartmdarling

I live in Motherwell & work in Edinburgh in the Oil & Gas sector, which has been taking me around the world for 15 years now. My passion for politics and music go with me every step of the journey...
This entry was posted in Currency, Economy, Politics and tagged , , , , , , . Bookmark the permalink.

4 Responses to Finance and the Referendum

  1. Peter Jones says:

    The BBC coverage has been partial and biased, and I speak as a long-time and loyal watcher of BBC and particularly its news output. In its broadcasts on Sunday the BBC coverage of front page headlines in the Sunday papers (in the wake of the Yougov poll putting yes ahead for the first time) had the reviewer reminding us that ‘of course the Sunday Herald is a supporter of the Yes campaign’. To be balanced and impartial she should then have given the loyalties of the other Sundays she reviewed, but she didn’t. It seems it’s fine for the BBC to urge us to look through the prism of its support for yes when looking at the Herald’s coverage but for us not to be told which camp all the other papers are supporting.

  2. The Gardener says:

    Good response to latest propaganda from the BBC. I wish to add the following detail.
    1. Lloyds Bank: Head Office, 25 Gresham Street, London EC2V 7HN Not Scottish.
    2. RBS: certainly not a Scottish Bank just now. 84% owned by the state (and under the effective control of Osborne).
    Often share prices have nothing to do with supply and demand but are set by ‘the market makers’ who act in mysterious ways, often their own interests.
    It is interesting to note the fortunes of the other two companies mentioned i.e. Standard Life and SSE:
    3. Standard Life: Share price: 406.30 Change: -10.10p (-2.42%)
    Shares sold (8/9/14) 4,566,157, shares bought 3,358,973, probably on the face of it an expected price fall relative to the number of shares bought and sold. However I agree that the reduction in the share price was a correction, quite common, following a major deal that has resulted in a large share price bounce.
    4. SSE: Share price: 1,475.00 Change: -34.00p (-2.25%)
    Shares sold (8/9/14) 1,670,627 but shares bought 2,061,140, so why the price fall? This is especially unexplained considering that when there is uncertainty in the financial markets utility companies like SSE are considered to be a safe haven.
    Yes, the BBC are at it. Douglas Alexander said this morning ’the markets have spoken’. Who would trust the markets or anybody who uses them as a reference for the debate? We live with the financial markets but following the experiences of recent years they are not trusted, unfortunately.

  3. gordon says:

    As a stock market geek i watched with interest on all of this on monday…..some context…..the Nikkei 500 the Japanese benchmark which is the first globlal market to open after the weekend fell 200 points during the Japanese session…this sets the tone for the european indexes when they open…they duly followed and all major indexes fell as did the US futures, interestingly some major Scottish companies share prices rose on Monday…Aggreko/Cairn Energy and some others. The weakness on monday was in every stock market in the world…nothing to do with Scottish independence……then you can look at the wekaness in Sterling……again on Monday there was general strength in the USD so almost every USD currency cross pair devalued on Monday……not just GBP/USD…ok GBP was the worst affected but it was a general market move…so more releavant headlines would have been market has a normal Monday..but i guess that does not sell papers or help the cause

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