Why Scotland’s referendum could affect global businesses

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Nov. 21 2019, Updated 2:45 p.m. ET

Business impact

Warnings and announcements are being made by major banks—including Lloyds, TSB, and the Royal Bank of Scotland—to move their registered offices and some operations to England in the event of a separation. Standard Life, the pensions and savings firm and the first significant Scottish business to warn of relocation, is drawing up contingency plans to potentially relocate funds, people, and operations to England if the Scots vote to leave the UK.

The aim of this relocation is to make sure transactions with customers outside Scotland will remain in pounds and subject to London’s financial regulations.

Moreover, prices in Scotland are expected to rise if Scotland claims independence. Exit clauses are being inserted into commercial property contracts in Scotland to allow buyers to scrap deals or renegotiate prices if voters opt for independence.

Market-moving impact

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With asset managers, investors, and pension savers moving billions of pounds out of Scotland on fears that Scotland will become independent of the UK after the vote on September 18, the currency markets’ reaction was expected. The pound sterling is currently falling to its lowest levels against the U.S. dollar.

The run-up to Scotland’s referendum is doing more damage than just affecting the British currency. It’s also making the market for exchange-traded funds investing in European equities like the Vanguard FTSE Europe ETF (VGK), the iShares MSCI EMU Index Fund (EZU), the SPDR DJ EURO STOXX 50 ETF (FEZ), the iShares MSCI EAFE ETF (EFA), and the iShares MSCI Germany Index Fund (EWG) jittery.

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