Scottish Referendum

Possibly the biggest subject in the news this week from the UK has been the Scottish referendum on independence. But what would the implications be and would it have any effect on expat living in Dubai?

When the idea of a referendum on Scottish independence was first announced, it seemed that Westminster did not think it needed take the possibility of a ‘Yes’ vote too seriously and completely failed to plan any sensible form of strategy to handle their campaign. In the last four weeks there has been a sudden furore as the number of opinion polls suggesting that the ‘Yes’ vote is gaining ground and even overtaking the status quo on a number of occasions. This seems to have woken up the Westminster politicians and they have all been visiting Scotland.

Now, I can’t pretend to have any emotional ties to Scotland as my last Scottish ancestors died about 100 years ago but losing Scotland from the UK would have a significant impact on the remaining three countries (England, Wales and Northern Ireland). Initially the impact would be on Sterling’s exchange rate with other major currencies such as US Dollar and Euro. Some commentators have suggested that if the ‘Yes’ vote does win then there could be a 5-10% drop in the value of Sterling in a very short period of time. For those of us earning in UAE Dirhams this may be an opportunity to send some money home and get a better exchange rate.

Stock markets have been jittery for the last few weeks as, like the Westminster politicians, most commentators and analysts thought that the possibility of a ‘Yes’ vote was remote. However as the gap has closed in the opinion polls the uncertainty factor has risen and if there is one thing that stock markets hate, it is uncertainty. As a result, many believe that the possibility of a ‘Yes’ vote has been priced into the UK’s main market (FT-SE 100) and so once the result of the vote is known there may be a bounce on Friday when the result is announced. If you were thinking of selling your shares invested in the UK markets, most commentators would recommend waiting until the decision is known as the companies that make up the main UK market earn most of their profits outside the UK which should protect their value in the long term, although there may be some initial volatility if the result is ‘Yes’. Remember investments are long term and you should not be effected by short term noise.

Even if the result is ‘Yes’ there will be many months of negotiations over a whole myriad of things so the process of independence or further devolution may just be beginning.

I hope you found the above interesting. If you have any questions or concerns please let me know.