An anti-independence ‘Better Together’ campaign canvasser posts ‘No’ leaflets in Edinburgh, Scotland, on September 17, 2014, on the eve of Scotland's independence referendum.BEN STANSALL/AFP / Getty Images
The European financial markets priced in a No vote in the Scottish referendum as campaigners on both sides pushed hard to win the allegiances of the undecided voters who stand to determine whether the United Kingdom stays intact.
On the day ahead of the referendum, the markets were relatively calm, suggesting that investors were fairly confident that the undecided voters would be swayed by their economic interests and opt for the stability of a Scotland within the United Kingdom rather than one left to its own devices.
The benchmark FTSE-100 index rose marginally and the pound gained almost a fifth of a percentage point. Still, the currency is down about 4 per cent since July, when the Yes side began to surge in the polls, rattling the investors who had assumed Scotland would never embrace independence.
Traders said the rise in the pound in recent days was probably due to hedge funds unwinding their short positions, gambling that a No vote on Thursday will push the currency even higher. In early September, when the pound was plunging, the London currency strategists at Nomura Securities recommended shorting the pound "up until the referendum, reduce your position and enter fresh longs before polling booths open in anticipation of a No vote."
A No vote, however, is far from assured, with polls indicating a photo finish. The three latest polls, from Tuesday evening, showed that the No side held a lead of four percentage points over the Yes side among the voters who had decided, a remarkable turnaround from the pre-summer polls early that gave the Yes side only about 35 per cent. The three polls put the undecided vote between 6 per cent and 14 per cent, making the vote exceedingly hard to call, even if investors themselves are betting the U.K. will not break apart.
The results of the referendum may not be known until dawn on Friday, after Glasgow, Edinburgh and Aberdeen, the last councils to report, release their tallies. Exit polls should come in hours earlier but may be unreliable, given the narrow spread between the Yes and No camps.
Voter turnout is expected to be high, with 80 per cent or more of eligible voters – age 16 and up – expected at the polling stations. The question on the referendum: "Should Scotland be an independent country?"
On Thursday, leaders from the main Westminster parties and the Scottish National Party (SNP) hit the streets in Glasgow and Edinburgh in their final effort to secure a victory for their camps.
Alistair Darling, the former Labour chancellor who leads the Better Together Campaign, urged Scottish voters to opt for the economic certainty that comes with the U.K. and warned that it would "take a lot of work" to heal the inevitable divisions between the Yes and No sides no matter who emerges triumphant in the referendum. "We've to calm things down because we have got to live together in what is a comparatively small country," he said.
SNP leader Alex Salmond continued to dismiss the unionists' warnings that Scottish independence would trigger financial hardship, or worse, for the 5.3-million Scots. "The central mistake that the No campaign has made is to tell the people of Scotland that the land of Adams Smith is not capable of running its own matters financially," he told the BBC.
Still, there are serious doubts about the post-referendum health of an independent Scotland. Everything from Scotland's share of the national debt and the currency it would use to the division of assets, such as nuclear submarine bases and the North Sea oil production, would be up for negotiations. Shorn of Scotland, Westminster might not be willing to be generous.
Mr. Salmond is confident that Scotland could go it alone because it has a strong banking and offshore oil industry. But some of the big banks have already said they would shift their headquarters to England if Scotland were to separate and several reports say that the SNP is exaggerating the long-term health of the North Sea.
In a new note, Scottish energy analyst Euan Mearns said the North Sea is in irreversible decline, though a few small discoveries and new production technologies should prevent output from falling of a cliff in the next few years. "Yes the North Sea has a future, but that future is quite dim compared to the past," he wrote.
Alex Kemp, professor of petroleum economics at the University of Aberdeen, said earlier this month that 99 new fields may be discovered in the North Sea in the next 30 years. While that sounds like a lot, an average of 12 fields have been discovered per year since 1965, implying the future discovery rate will fall to a quarter of its historical average