The long awaited moment finally arrived after Scots began voting at 7am BST on whether to break away from the U.K. and end the 307-year union, even as latest opinion polls show the campaign against independence maintaining a narrow lead over those favoring independence.
A handy way to see where the various polls stand is on the following BBC page:
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That said, the margin of error is too small for any decisive calls, as the fate of Scotland really lies with the Undecideds, who number anywhere between 5% and 14% and who can easily shift the final outcome away from the No camp if they vote Yes in the next few hours.
Polling booths will close at 10pm BST by which point the 4.3 million-strong electorate will await the initial results which may be released after 2am BST Sept. 19 with final numbers around 6am.
Notably, for those who enjoy liveblogs from local sources, there will be no media reports on the campaigning until polls have closed later in the day.
Somewhat surprisingly, the Yes camp got an unexpected boost just hours before the polls opened when 27 year old tennis star, and Scot, Andy Murray declared his support for Scottish independence in an 11th hour intervention on Thursday morning, after years of keeping silent on the issue.
Huge day for Scotland today! no campaign negativity last few days totally swayed my view on it. excited to see the outcome. lets do this!
— Andy Murray (@andy_murray) September 18, 2014 [14]
The Telegraph reports [15]:
Having refused to be drawn on the subject in the past, Murray seemed to tweet his support for the Yes campaign to his 2.7 million followers. The 27-year-old Wimbledon champion - one of Scotland’s highest profile nationals - nailed his colours to the mast just hours before polls opened, writing: “Huge day for Scotland today! no campaign negativity last few days totally swayed my view on it. excited to see the outcome. lets do this!”
Murray, who grew up in Dunblane, Stirling, has previously expressed his admiration for staunch No supporter Gordon Brown, however on Thursday suggested he had been put off by the No camp’s recent campaign tactics.
His tweet received mixed reactions from his fans. One wrote: “Aw nice one Andy! (Left it a wee bit late there, could you no have come out a bit sooner”
While one follower from the No side said: “Disappointed in you andy, you may have just swayed the undecided.”
As a long-time resident of Surrey, Murray will not have a vote but he has generally been seen as a firm Scottish nationalist - drumming up controversy in 2006 when he said he would support "anyone but England" in the World Cup.
Murray has been quizzed on the issue previously but dodged the question, although in an interview in June he criticised Alex Salmond, the Scottish First Minister, for waving the country's flag at the tournament last year.
When pressed on the issue of independence in an interview after his Wimbledon victory, he said: “You don't want to come to a snap decision and then see the country go t*** up.
“I am proud to be Scottish, but I am also proud to be British. I don't think there is any contradiction in that.”
...
"If Scotland became independent, then I imagine I would be playing for Scotland," he said. "I haven't thought that much about that yet because I don't think it's looking too likely that it's going to happen. But if it did happen, then it would be pretty much the first time in my life that I would have ever (had the chance to play for Scotland)."
He added that he did not like making his views on politics known as previous comments had "caused me a headache ... and a lot of abuse".
One does wonder if this isn't just a case of "too little, too late", when all the firm believers in the status quo have already voiced their support of the No vote repeatedly and consistently in recent weeks, ever since a Yes outcome became a possibiliy.
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So how is today's outcome being traded?
One look at cable shows that there is increasing relief based on the latest set of polls that the No vote will have it, and the GBP has been rising aggressively against both the USD and the EUR, with the EURGBP moments ago sliding to a fresh two year low.
Here is what Wall Street said in its most recent commentary on the vote, via Bloomberg:
Morgan Stanley
- GBP may come under initial pressure as first regions to release results of Scottish referendum have a tendency to lean toward “yes” vote, FX strategists including Ian Stannard, say in client note
- Volatility expected overnight as results are released on region-by-region basis; larger regions with the highest percentage of vote aren’t expected to report until later
- In longer term MS maintains GBP/USD bearish view for next year
Jefferies
- GBP has prospect of marked recovery on a “no” vote
- Negative shock to GBP from “yes” vote would be huge; it’s this entry to uncertain world that makes “yes” vote unlikely
- Path could still be rocky as results come in
- With Glasgow and Edinburgh not expected to declare until 5:00am local time there is room for considerable GBP volatility overnight; North Lanarkshire has been pinpointed as good early indicator given its proximity to Glasgow
Societe Generale
- RBS and Lloyds face three distinct threats from credit perspective, if Scottish voters say “yes” to independence, Guy Stear and Paul Fenner-Leitao, analysts, write in client note dated Sept. 17
- First and biggest threat is regulatory; second threat is currency; third threat is taxes
- Sequence of events which might follow a “yes” vote may be as unpredictable, uncontrollable as the late 1980s in Eastern Europe, global strategist Albert Edwards says in strategy note dated Sept. 15
Liberum
- Impact of Scottish independence vote on banks’ direct costs and pensions is overdone
- Sees relief rally of 3%-5% for RBS and Lloyds if Scotland votes “no;” notes Lloyds, RBS have contingency plans to move
- Cost of “yes” vote may be modest, mainly related to compliance, small increase in complexity
- Net increase in costs for Lloyds, RBS may be GBP100m or ~2% of pretax
- HSBC, Barclays may see costs increase about half as much as RBS, Lloyds
Commerzbank
- Oil prices may react to referendum despite having no impact on market supply-demand, bank says in e-mailed report
- “A ‘‘yes’’ vote for Scottish independence would generally increase uncertainty on the markets in the short term, which would certainly be sufficient to put pressure on oil prices”
Goldman Sachs
- More Scots will probably vote on Sept. 18 for “safe” status quo than opinion polls indicate, economist Kevin Daly says in client note dated Sept. 16
- Implications of “no” vote would largely depend on size of majority; in event of “yes” vote, talks over terms of independence would be complex and potentially contentious; general consequence would be prolonged uncertainty
- Goldman’s latest ’poll of polls’ suggests vote is a 3-point race, with 48.7% support for “yes” and 51.3% for “no”
HSBC
- Polls suggest Scotland’s Sept. 18 referendum on independence is too close to call, Bert Lourenco, head of EMEA rates research at HSBC, writes in client note on Sept. 16
- Recommends investors stay neutral U.K. duration, with a steepening bias to curve, underweighting 10Y-20Y sector
- Evidence of vote against independence could see GBP retrace recent move to around 1.65 vs USD, analysts led by David Bloom write in client note; vote in favor of independence would see further lurch lower in GBP due to heightened uncertainty, targeting 1.55
- As referendum nears, risks associated with “yes” vote remain high; now in situation where whichever way vote goes, GBP/USD will move: MORE
Pimco
- Scotland would have to use pound in case of independence vote and BOE may delay tightening, manager Mike Amey says in Bloomberg TV intv Sept. 16
- Pimco hasn’t trimmed holdings of gilts before vote money
- Short-dated gilts may rally on “yes” vote
- Risk of capital flight from U.K. but not Pimco’s central expectation
JPMorgan
- 60-40 odds are in favor of “no” vote, economists Allan Monks and Malcolm Barr write in client note on Sept. 15, citing possible presence of status-quo bias for subjective assessment
- GBP/USD weakening by 6%-7% is possible in first few weeks after a Scottish vote for independence, strategists including Paul Meggyesi write in client note dated Sept. 12
- See 10Y gilt yield selling off 10bps-15bps in event of vote for independence, with 5Y/5Y forwards rising and 5/10 curve steepening ~5bps-10bps: MORE
Nomura
- Assigns 30% probability to Scottish independence
- May cause relatively indiscriminate selling of U.K. assets as they are the liquid ones trading
- Recommends differentiation as independence would be much worse for Scotland’s economy than the New U.K.’s.
- On Sept. 8 recommends to short GBP/USD up until Scottish referendum, reduce position the day before the vote and enter fresh longs before polling, in anticipation of a “no” vote
Indeed, the prevailing consensus is that No will have it in the end, if by a slim margin. Here is DB's Jim Reid:
I think it will be slightly more in favour of the NOs than that as the fears of job losses and price rises as a result of independence (justified or not) may sway the weaker conviction voters. However this is just an educated hunch. Assuming it is vaguely close though, things might never be quite the same again and more and more power might be handed over to the Scots over the coming months/years and this vote may come again one day. Also other dissatisfied regions around the world are likely to have already been empowered by the successes so far in the YES campaign. However a NO in any form will make this a slow burning issue rather than an immediate problem that a YES vote would bring, especially in UK assets.
Yet not everyone is firmly in the "No to Independence" mindset. As Bloomberg reports, Newton Investment Management, with an AUM of GBP51 billion, is shorting GBP and gilts into Scotland’s referendum on independence, head of fixed income Paul Brain says in phone interview.
Base-case view is that “no” vote will win, and sees three likely scenarios
1) Resounding “no” vote, under which market uncertainty would disappear
2) ’No’ vote with small majority, whereby issue lingers on as “neverendum,” undermining U.K. govt
3) ’Yes’ vote, which would exaggerate U.K. political risks and be quite negative for U.K. assets in short term
Is short GBP/USD into referendum, as only one of these outcomes would be positive for pound -- and size of victory is also important for currency
Shorts gilts across curve because U.K. economic strength would justify BOE rate increases, if referendum were not going on. Yields should also rise if referendum stokes political uncertainty and raises questions about “who’s standing behind gilts”
In any event, we will report the results once they start being released later today, even if we too are skeptical that the true will of the people, assuming it is for independence, will be allowed to be voiced: there is just too much at stake to a statist oligrachy for the legacy status quo to be so violently challenged.
