Management at Lloyds Banking Group (LSE: LLOY), Royal Bank of Scotland Group (LSE: RBS) and Standard Life (LSE: SL) will have hated every minute of being dragged into the final days of the Scottish referendum debate.
They’ll be glad to have ended up on the winning side, though. That means they don’t have to make good on their threats to leave Scotland and set themselves up in London. At least not yet.
Management at RBS has already said that it is staying put, and it will be “business as usual” for its Scottish clients. But Lloyds was less full-throated, merely stating that it was committed to maintaining “a significant presence” in Scotland.
Insurer Standard Life was also equivocal. Statements made before the referendum suggested it would continue to monitor its position even if Scotland voted No.
Today it merely said: “We will consider the implications of any changes for customers and other stakeholders in our business to ensure their interests are represented and protected.”
The referendum has been a disconcerting business for these financial giants. The wounds won’t be healed overnight. They’re clearly still edgy.
Yes Forever
The independence referendum unleashed a wave of anti-capitalist feeling among parts of the Scottish electorate, who believed they were voting to turn Scotland into a socialist paradise.
The head of steam built up by the Yes campaign won’t be easy to switch off. Lloyds, RBS or Standard Life won’t want to endure a repeat of their recent experience, if the Nationalists decide to give it another go.
The prospect of this being a regular upheaval, repeated until the Yes camp finally gets the answer it wants, would do a lot of damage to the investment case for these three financial giants.
RBS is going nowhere for now. But the seed of an idea has now been planted in management heads at Lloyds and Standard Life, and could one day germinate into action.
Max It Up
Nothing is likely to blossom out of the blue. But the UK is now headed for a phase of constitutional upheaval, as politicians on all sides agree that the union needs shaking up.
As Tony Blair admitted, his decision to greenlight a Scottish Assembly helped fuel the Yes campaign, rather than kill it.
With Scotland promised devo max, more powers to Holyrood could lead to yet more separatist sentiments. Especially if the Barnett formula is scrapped as part of any shake-up.
Another round of this wearying debate could deter foreign investment into Scotland, hitting the economy in general, and the banks in particular.
England Expects
If we get English votes for English laws, as David Cameron has pledged, that could also up the ante. Depending on how the constitutional shake-up pans out, the Tories could still be in charge in England even if Labour dominates the House of Commons.
It could lead to a more pro-business culture in England, due to the relatively high number of Tory MPs, than in social democratic Scotland.
If England becomes more pro-business than Scotland, they could attract relatively more wealth and workers. Many Scottish companies will be tempted to join the brain drain south.
Remember, Lloyds, RBS and Standard life have far more customers in England than in Scotland.
Head South, Young Man
None of these institutions are going anywhere, as yet. But this year’s debate won’t be quickly forgotten, and it could flare up again at any time.
A devolved Britain might also send yet more foreign investor money to London.
If it does, Lloyds, RBS and Standard Life could be forgiven for deciding they’ve had enough. And yet another layer of uncertainty will continue to hang over their share prices.