Pound strengthens as Scottish exodus grows – business live

Worries about the state of the global economy after higher than expected US weekly jobless claims and weaker than forecast Chinese inflation have combined to unsettle global stock markets, although they have come off their worst levels. On top of that, new EU sanctions against Russia over its actions in Ukraine are due to come into force on Friday. In the UK there is also, of course, uncertainty over the outcome of next week’s Scottish referendum vote, although the latest poll gave the no vote a majority and helped Scottish-linked shares gain some ground. Overall the scores on the doors showed:

• The FTSE 100 finished 30.49 points or 0.45% lower at 6799.62
• Germany’s Dax was down 0.09% at 9691.28
• France’s Cac closed 0.22% down at 4440.90
• Italy’s FTSE MIB fell 0.23% to 21,092.24
• Spain’s Ibex ended down 0.47% at 10,886.3

In the US the Dow Jones Industrial Average is currently 16 points or 0.09% lower.

Meanwhile the pound is at $1.6230, off its best levels but still recovering from yesterday’s 10 month low of $1.6051.

On that note, it’s time to close up the blog for tonight. Thanks for all your comments, and we’ll be back again tomorrow.

Stock markets have turned lower following weaker than expected US jobs data.

The number of Americans claiming unemployment benefit unexpectedly rose last week by 11,000 to a seasonally adjusted 315,000. This was the highest figure since late June and worse than the 300,000 analysts had been expecting.

The figure includes the Labor Day holiday, which probably added to the volatility, but nevertheless it has unsettled investors ahead of next week’s Federal Reserve meeting, which will reveal the central bank’s latest thinking on the pace of its bond buying programme and the timing of any rise in interest rates.

Along with that, markets have begun to take notice of the fact that EU sanctions against Russia over Ukraine come into force tomorrow. And in the UK, of course, there is the uncertainty of next week’s referendum vote.

So the FTSE 100 is currently down 55 points or 0.8%, while in the US the Dow Jones Industrial Average has lost 75 points of 0.44%. In Germany the Dax is down 0.52% while France’s Cac is 0.72% lower.

Spain’s Ibex is off 0.85%, also hit by concerns of Catalonia splitting away from the rest of the country if Scotland votes for independence.

The boss of Asda has said the supermarket will be forced to split its business if Scotland votes for independence, raising the prospect of higher prices north of the border, writes Jennifer Rankin. John Lewis chairman Sir Charlie Mayfield issued a similar warning earlier today. He said:

The costs of doing business for most retailers are somewhat higher in Scotland than the rest of the UK but most retailers have one price across the UK. In the event of a yes vote that might change.

Andy Clarke, chief executive of Asda, the UK’s second largest supermarket, which has 61 stores north of the border, said if Scotland voted for independence it would be “imperative” to set up a separate Scottish business.

If we were no longer to operate in one state with one market and, broadly, one set of rules, our business model would inevitably become more complex. We would have to reflect our cost to operate here.”

This is not an argument for or against independence, it is simply an honest recognition of the costs that change could bring.

Clarke attended a reception of business leaders at 10 Downing Street on Monday, where prime minister David Cameron urged executives to do everything they could to keep the union together.

The supermarket boss said last year that a ‘yes’ vote would increase pressure on costs, echoing a similar warning from Sainsbury’s.

The Better together campaign predicts that the currency chaos that would ensue if Scotland went it alone would cost Scottish families dear. The group says:

The governor of the Bank of England has provided written evidence to the Treasury Select Committee that confirms spending cuts or tax rises that would equate to at least £4,000 per person in Scotland to match the currency reserves held by Denmark, which pegs to the euro. This is a conservative estimate and the actual figure could be much higher.

To match the currency reserves held by Hong Kong, which pegs to the Dollar, would mean tax rises and spending cuts worth £95 billion - the equivalent of £18,000 per person in Scotland. This means there would need to be huge cuts to public spending on things like our NHS and pensions.

Chief Secretary to the Treasury Danny Alexander says:

This letter provides further damning evidence of the massive cost to every Scot of going it alone. To match the reserves held by Denmark would cost each of us £4000, but if we had to build up Hong Kong style reserves the cost would be five times greater.

In the end, that money would have to be found from every Scots wages, taxes, or the public services like the NHS that we cherish. It is extraordinary that this fundamental issue has not been talked about or thought about by nationalists.

With higher costs and fewer businesses paying tax, the price would be paid in higher income tax and less money for the NHS. There is a simple way to avoid these and get the change Scotland needs - vote ‘no thanks’ next week.

Governor Carney’s letter can be read at the following link: http://better.tg/1Bun6k9

RBS boss Ross McEwan has tried to reassure staff that the bank has no intention of moving operations or jobs from Scotland following a Yes vote in next week’s referendum. The bank’s announcement that it would move its head office to London sparked fears for its 11,500 jobs in Scotland.

Scotland’s first minister Alex Salmond welcomed McEwan’s pledge, naturally.

McEwan said in a memo to staff:

This is a technical procedure regarding the location of our registered head office. It is not an intention to move operations or jobs.

Our current business in Scotland, including the personal and business bank, IT and operations, human resources and many other functions, are here because of the skills and knowledge of our people, and the sound business environment. So far, I see no reason why this would change should we implement our contingency plans.

Alex Salmond has accused the Treasury of leaking market sensitive information about the future of RBS in Scotland in a dirty tricks campaign to undermine the independence campaign, writes our Scotland correspondent Severin Carrell.

The first minister said it was an office of “enormous gravity” by an unnamed Treasury official to tip off the BBC last night about a decision by RBS to move its registered office to London after a yes vote.

That leak – confirmed on Thursday morning to the Stock Exchange by RBS, sent the bank’s shares down overnight on the Asian markets, the first minister said.

Salmond said he was now demanding a formal leak inquiry by Sir Bob Kerslake, the head of the UK civil service, and would be sending in an official complaint today. He also insisted the BBC had a duty to cooperate, implied it was duty bound to reveal its source.

So, Mark Carney says “it would not be appropriate for me to judge the apportionment of the UK’s reserves in the event that Scotland were to become an independent state”. The eagerly awaited financial details of what sterlingisation would mean for Scotland turn out to be a series of tables that compare the reserves of various countries with currency pegs as a percentage of broad money, bank deposits and GDP.

Helpfully, Treasury Committee chairman Andrew Tyrie’s team has worked out what it means for Scotland – but the figures range widely from £34bn to £398bn. At the bottom end, Scotland would need a total of £34bn of reserves to match Denmark’s ratio of reserves to GDP. At the top end, it would need £389bn of reserves to match Denmark’s ratio of reserves to bank deposits.

As Tyrie concludes: “whatever currency arrangement is chosen, a separate Scotland would require huge reserves”.

The (potential) exodus from Scotland is growing: Tesco Bank has become the fifth bank to say it would move its head office from Scotland to England if Scots back independence. The bank, which employs 3,200 people in Scotland, said in a statement on its website:

To ensure we provide long term continuity for customers after the transition is complete, our contingency plans include the creation of a new registered company, domiciled in England.

While the creation of a new company would change the address of our registered headquarters, we do not expect there would be any immediate impact on colleagues at our existing centres. Scotland is an important market to us and will continue to be an important market regardless of the outcome of the referendum.

Bank of England governor Mark Carney yesterday added fuel to the debate when he said that an independent Scotland would need to build up billions of pounds worth of currency reserves if it wanted to keep the pound, without a formal currency union.

He has sent the Bank’s work on currency sharing schemes to Andrew Tyrie, the chairman of the Treasury Committee. It’s a fact sheet with a number of tables that summarise the reserves held by countries that use currency boards or fixed peg. The read-across for Scotland varies widely, depending on whether the reserves are expressed as a percentage of GDP, a percentage of bank assets, or a percentage of broad money.

Using the Bank of England’s figures, Tyrie’s team worked out that:

· Scotland would need a total of £162bn of reserves to match Denmark’s ratio of reserves to broad money.

· Scotland would need a total of £389bn of reserves to match Denmark’s ratio of reserves to bank deposits.

· Scotland would need a total of £34bn of reserves to match Denmark’s ratio of reserves to GDP.

· Scotland would need a total of £98bn of reserves to match Hong Kong’s ratio of reserves to broad money.

· Scotland would need a total of £272bn of reserves to match Hong Kong’s ratio of reserves to bank deposits

· Scotland would need a total of £155bn of reserves to match Hong Kong’s ratio of reserves to GDP

The figures are calculated by applying Denmark and Hong Kong’s ratio of reserves to money supply, reserves to deposits and reserves to GDP to the money supply, deposits and GDP figures of Scotland. For instance, Denmark’s reserves to GDP ratio is 26% and Scotland’s GDP is £130bn; thus, to achieve a reserves to GDP ratio equivalent to Denmark’s, Scotland would require reserves totalling £34bn.

Lord Wolfson, the chief executive of Next and a Conservative peer, said the retail group would remain committed to Scotland whatever the outcome of next week’s vote, and refused to come down on one side or the other of the divide.

He played down fears of rising costs, but said there was some concern about any new Scottish currency and what would happen to taxes in the case of independence. My colleague Zoe Wood reports:

Lord Wolfson, who is a member of George Osborne’s inner circle, said:

“Which ever way the vote goes Next will remain absolutely committed to Scotland, it’s an important part of our business - about 9% of turnover - and what ever happens we will continue to invest in Scotland.

“Operationally we don’t forsee any big issues in terms of our systems, our transport, our logisitics - all those things will be very straightforward because we already operate in a separate currency in Eire.”

Because the retailer’s warehouse is in Yorkshire, he added that he did not see any “internal” reason to increase costs. He went on:

“We are concerned about what will happen to the currency because if the new Scottish currency devalues that will push up prices in Scotland. My second worry is taxes: no one can quite understands the financial situation of the new Scottish government will be and whether taxes will remain where they are. The third thing is financial sector jobs where it does look as though some of the big financial players are now talking seriously about having to relocate. There are well paid jobs and unlikely to be replaced with jobs that pay as much.

“I think it’s a decision for people in Scotland. The reality is I have customers and staff on both sides of the debate so I don’t think it’s for us to come down on one side or the other.

“I think all that business can do is be honest and frank about the implications of a yes vote.”

Meanwhile Martin Gilbert, head of Aberdeen Asset Management, has said an independent Scotland would be a big success, and would prosper whatever the outcome of the referendum.

TSB, which was spun off from Lloyds Banking Group last year, has become the fourth bank to say it will move some operations to England if Scots vote for independence, following similar announcements from RBS, Lloyds and National Australia Bank’s Clydesdale.

TSB, which has 189 branches and employs almost 2,000 people in Scotland, said it would set up additional legal entities in England. Some 27% of its 4.7m customers are in Scotland.

Remember that it was the two Scottish banks - RBS and HBOS (through Lloyds) that required taxpayers bailouts of over £70bn, writes independent City analyst Louise Cooper.

It may be viewed as unjust if the whole of the UK picked up the tab to bailout the two Scottish banks only for them to become Scottish in the recovery. Maybe Alex Salmond should be grateful that RBS and Lloyds/HBOS have said they will move south of the border. Westminster may well have given Mr Salmond a £70bn invoice for bailing out the Scottish banks. If Salmond wants the credit of past North Sea oil revenue to be taken into account in Scotland’s new balance sheet, then past debits should be factored in too.

John Lewis has warned about keeping its pricing policy the same if Scotland leaves. But what about the Royal Mail? Does its universal service obligation continue of Scotland goes it alone? Or will the Shetland Islands have to pay much closer to the real cost of delivering to them? There are so many implications of Scotland’s independence. Most of which will only be discovered if it happens.

I was in Aberdeen for three days at the weekend. A couple of things struck me. Firstly that many people I met were still undecided. Secondly that any No voters were keeping quiet about it as Nationalistic fervour was gaining ground. And thirdly that Scotland does not want to go the way of the divisions of Northern Ireland. The divide seems to be getting deeper and the emotional debate heated. Although clearly the debate in Northern Ireland is religious as well as political, the divisions run deep. I fear for the future of unity within Scotland as the campaign becomes more bitter.

There are so many uncertainties in this debate. Not least what happens to various company names? If Scotland votes yes, where does it leave RBS? It cannot continue as Royal Bank of Scotland? Does British Petroleum become the Rest of UK Petroleum? or RUKP? Feel free to send any suggestions of name changes and I’ll tweet the best efforts.

The John Lewis chairman has waded into the Scotland debate, warning that prices will go up north of the border if the yes camp wins. As my colleague Sean Farrell reports, Sir Charlie Mayfield said the employee-owned retailer did not intend to reduce its commercial operations in Scotland, where it has nine stores, a contact centre and more than 3,000 employees.

But he said that if Scotland votes for independence, retailers are unlikely to spread the higher operating costs of doing business there across the UK as they do now. He also warned there would be economic upheaval in the wake of a yes vote.

From a business perspective there will be economic consequences to a Yes vote, not just in uncertainty but some of the turmoil we are hearing about.

And it is also the case that it does cost more money to trade in parts of Scotland and therefore those hard costs, in the event of a yes vote, are more likely to be passed on.

For various reasons – regulation and transport costs etc – it does currently cost more money to serve parts of Scotland.

The Bank of England’s analysis of how countries such as Panama use another country’s currency has landed on the desk of Andrew Tyrie, chairman of the Treasury Select Committee, my colleague Angela Monaghan reports. The committee is hoping to make it public early this afternoon. It should shed some light on what sterlingisation might mean for an independent Scotland, further fueling the debate.

Back to Scotland. Betfair’s Exchange is predicting a victory of the no camp. Whilst a high number of smaller bets have come on yes in recent weeks, the big money trades continue to go on no. The internet betting exchange says:

Three-quarters of trades over £2000 have been on NO and two London-based customers have placed bets as high as £19,000 and £22,000 on NO in recent days, just after Scottish opinion polls indicated a big swing to YES.

Scottish customers, who make up 20% of the overall participants in the market (compared to just 9% of the UK population), have made a significant number of bets on YES since the weekend, forcing brief contractions in the price.

78% of back bets from Scottish customers were on YES and they now account for 33% of the total back bets on YES whilst placing only 8% of the back bets on NO.

But the overall weight of money is still on NO (£4m of the £5m matched), and yesterday’s Survation research for the Daily Record sparked a flurry of activity with NO backed into 1.25 (implying a 80% chance) and YES drifting to 5.0 (a 20% chance).

Betfair spokesman James Midmer said:

Punters’ betting decisions are formed from a variety of factors, with opinion polls being just one. Whilst the recent YouGov poll sparked a flurry of smaller YES trades the bigger money remained firmly on NO and this was backed up with yesterday’s Survation research for the Daily Record.

The trends amongst Scottish customers are interesting, but accuracy can also come from a greater degree of detachment and it’s perhaps worth noting that the betting markets proved a far more accurate judge of the last US election (with no US based customers) than local opinion polls.

Turning to the pound, the recent heavy sell-off has abated. Sterling recovered from a 10-month low against the dollar and also gained against the euro today, after a new Scottish poll suggested the ‘no’ camp is gaining the upper hand again.

The poll, conducted by Survation on behalf of the Daily Record, showed 47% intend to vote ‘yes’ to independence while 53% plan to vote against. The figures exclude 10% of people who were undecided, however.

Sterling strengthened 0.2% to $1.6242 against the dollar, after hitting $1.6051 yesterday, its lowest level since mid-November. Against the euro, it traded at 79.630p, well below the euro’s three month high of 80.66p struck yesterday.

European stock markets are treading water at the moment. The FTSE 100 index is up nearly 4 points, or 0.05%, at 6833.58. Germany’s Dax has advanced some 14 points, or 0.15%, to 9714.29, while France’s CAC slipped almost 6 points, or 0.13%, to 4445.15.

In London, shares in Royal Bank of Scotland and Lloyds Banking Group rallied after the banks said they would walk away from Scotland and move to London if the ‘yes’ camp prevails. RBS gained 5p, or 1.5%, to 347.2p while Lloyds climbed 0.6p, or 0.8%, to 73.81p.

The Edinburgh-based insurer Standard Life, which yesterday said it would move parts of its business south of the border, including pensions and investments, was also among the biggest gainers on the FTSE 100. It added 6.1p, or 1.5%, to 413.5p.

The Adam Smith Institute published a report in August saying Scotland’s use of the pound without a formal currency union could give it more stability than the rest of the UK. The free-market think tank argued “sterlingisation” along with banking reforms could lead to banks taking fewer risks and reduce the risk of future financial crises.

Sam Bowman, research director at the institute and the author of the report, said Scotland was “almost uniquely primed for such a system of ‘adaptive sterlingisation”’.

The examples of Panama and other dollarised Latin American economies are proof that countries can thrive when they unilaterally adopt another country’s currency.

Combined with a flexible, adaptive banking system, the unilateral use of another country’s currency can instil a discipline in a country’s financial sector that neither a national currency nor a currency union can provide. Scotland’s banking system is almost uniquely primed for such a system of ‘adaptive sterlingisation’.

The path outlined in this paper would go almost unnoticed by the average Scot - until the next big economic shock, when they might just wonder why their system was so much more stable than that of the country they’d left behind.

The report noted that this would take Scotland back to the golden days of free banking of the 18th and 19th centuries.

Between 1716 and 1844, Scotland had one of the world’s most stable and robust banking systems. It had no central bank, no government-backed lender of last resort, and no bank bailouts.

When banks did fail, it was shareholders who were liable for paying back depositors, not taxpayers. The economy flourished.

The other big corporate news this morning is that Royal Bank of Scotland would move its head office from Scotland – where it has been based since 1727 – to London if Scotland backs independence.

The news came after the other bailed-out bank with major operations in Scotland, Lloyds Banking Group, revealed last night it would set up legal entities in England to protect its credit rating, as our City editor Jill Treanor reports.