Matt PichtThe Scottish referendum on independence happens next week — and thanks to recent gains in the polls by the "yes" movement, no one's entirely sure what the outcome of the vote will be.
Now, the country's financial institutions have come out with their plans for an independent Scotland. The country's biggest banks, including the Royal Bank of Scotland and Lloyds Bank, announced they will leave Scotland if it becomes independent.
RBS and Lloyds say they plan to shift their headquarters to England if Scotland becomes a separate country. Both institutions insist the relocation won't affect the majority of their operations in Scotland; the move should only take a few high-profile jobs across the border. (Video via BBC)
Several other major banks also say they have exit strategies if the "yes" vote wins. And it's not hard to see why banks are eager to jump ship — a new country represents a big risk.
For starters, there's the pound sterling — the currency of England, which all of Scotland's major banks use. The banks don't want to switch from the reliable pound to an unproven currency, and Governor of the Bank of England Mark Carney recently warned an independent Scotland couldn't keep the pound.
"A currency union is incompatible with sovereignty."
Besides the pound, England has another strong asset: the Bank of England, which regulates U.K. finances and provides a safety net for the financial industry. The U.K. government still has significant stakes in both RBS and Lloyds after bailing them out from the 2007-08 financial crisis.
It'd be hard for an independent Scotland to guarantee the security of the banks in the same way; a recent analysis found Scotland's banks are worth more than 12 times the country's estimated GDP.
The potential bank exodus has largely been seen as a serious blow for the country. Financial services are a key part of Scotland's economy, and the loss of the Royal Bank of Scotland, which has been headquartered in the country since 1727, is particularly painful for everyone involved.
A BBC analyst says this move would rob the new Scotland of future tax revenue, and a writer for The Guardian suspects financial jobs and opportunities would gradually shift towards the banks' new London addresses. The Express simply sums up the announcement as a "Black Wednesday" for First Minister and independence champion Alex Salmond.
But a Forbes contributor notes the bank exodus could actually bolster the Yes campaign, since it disables a critical economic argument against Scottish independence — namely, their inability to support large banks.
"Before this announcement it was possible to say that Scotland couldn’t be independent because it just couldn’t afford to backstop its banks, not if it retained the pound. Now that problem is solved, the potential liability will be upon London not Edinburgh and the Scots are off and (ahem) scot free."
Scotland's referendum is scheduled for Sept. 18. If Scotland votes yes, the two countries would have about a year and a half to work out the details of the divorce before Scotland's independence day, which would take place in March 2016.
This video includes images from Getty Images.
