CHINA TOPIX

05/07/2024 06:46:30 pm

Make CT Your Homepage

Scottish independence: Global Investors Desert British Economy Amid Fears of Yes Vote

Scotland

(Photo : REUTERS/TOBY MELVILLE) The Scottish saltire flag (L) and Union flag fly outside the Scottish Office, in central London.

Big foreign investors have been withdrawing billions of pounds worth of investments from the British economy amid growing fears that Scotland would vote Yes to independence.

The investment bank, Societe Generale, recently showed figures indicating that investors have been pulling out from the U.K. as Japan's biggest bank, Nomura, warned its clients of a "cataclysmic shock" due to the potential collapse in the pound.

Like Us on Facebook

Nomura told its clients to pull their money out of British companies and to bet against the shares and bonds of the British government and the share prices of U.K. banks.

In an interview with the Telegraph, Nomura's foreign exchange strategist Jordan Rochester, said that hedge funds have begun pulling out some time ago, but now, even long-term global investors are also starting to withdraw from the British economy.

The pound sterling has dipped sharply following the shock poll over the weekend, which suggested that Scotland is in favor of being independent from Britain.

For months, global investors have pulled out its bonds and shares out of the British economy, according to the United Kingdom stock market funds data, which shows a mass withdrawal of billions of pounds from British companies.

From about £8.6 billion (US$14 billion) flowing out of the British economy at the beginning of 2014, it recently went up to nearly £12 billion (US$20 billion).

Analysts from the Societe Generale told investors that the amount being pulled out of the British economy may still worsen as Scotland becomes independent from Britain.

The pound has fallen again on Tuesday until the Bank of England's Governor, Mark Joseph Carney, spoke to unions, which suggested to investors that a possible rise in interest rate may be looming.

 Carney said that if Scotland gained its sovereignty, it would be impossible to have a currency union.

"Currency union is incompatible with sovereignty," Carney said.

Meanwhile, liberal economist Paul Krugman over the weekend warned about the possible consequences of Scotland's independence, saying that it was a huge risk.

"You may think that Scotland can become another Canada, but it's all too likely that it would end up becoming Spain without the sunshine."

Real Time Analytics