How United is the United King­dom now?

Financial Mirror (Cyprus) - - FRONT PAGE -

Scot­land has made its voice heard. After lengthy de­bate and fierce cam­paign­ing on both sides, it voted to stay true to its 307year al­le­giance to the rest of the United King­dom. The vote, how­ever, came much closer than many politi­cians in West­min­ster would have liked. Although the end re­sult was nearly 55% in favour of the cur­rent union, the mood for change and of­fers of de­vo­lu­tion will cer­tainly have a sig­nif­i­cant im­pact in the com­ing months. The ques­tion now is what that im­pact will be.

I am in fact writ­ing this week’s col­umn from London, and what an in­trigu­ing time it is to be in the City. Un­sur­pris­ingly, the roller­coaster of emo­tions on the ground, and the un­cer­tainty of busi­nesses and in­vestors here, have been vis­i­ble in the fi­nan­cial mar­kets. In the weeks pre­ced­ing the vote, as the ‘Yes’ cam­paign climbed in the polls, the pound sank. Busi­nesses with Scot­tish of­fices made con­tin­gency plans and banks sent money north of the bor­der in an­tic­i­pa­tion that the pub­lic, with no clar­ity on what cur­rency would be used if the coun­try be­came in­de­pen­dent, may rush to with­draw as many pounds as pos­si­ble.

In con­trast to the out­pour­ing of ju­bi­la­tion we could have ex­pected in parts of Scot­land had the ‘Yes’ vote for in­de­pen­dence been vic­to­ri­ous, the over­rid­ing mood in the UK’s cap­i­tal when the ‘No’ re­sult was an­nounced was one of sheer re­lief. It was a re­lief that to­tal po­lit­i­cal and eco­nomic chaos was avoided. This man­i­fested it­self in a strong ster­ling as the cur­rency reached a two-year high against the euro and climbed half a cent against the dol­lar.

Yet, in the days fol­low­ing the vote, the ini­tial sense of re­lief has been mixed with anx­i­ety about what ex­actly will hap­pen next. Keen to con­vince his fel­low Scots to vote ‘No’, Gor­don Brown promised “a mod­ern form of Scot­tish Home Rule” with pub­lic funds and in­creased de­vo­lu­tion if the coun­try stayed in the union; the three main po­lit­i­cal par­ties all backed his of­fer. So, pre­sum­ably, Scot­land will en­joy the au­ton­omy of an Amer­i­can state?

Not all politi­cians support any dras­tic or rushed change, how­ever, and de­vo­lu­tion would cre­ate var­i­ous con­sti­tu­tional prob­lems. Should Scot­tish MPs be able to vote on is­sues that only af­fect Eng­land? Will greater de­cen­tral­i­sa­tion be pos­si­ble on a re­gional level, grant­ing, for ex­am­ple, power over wel­fare and ed­u­ca­tion to London which has a sim­i­lar pop­u­la­tion to Scot­land’s 5 mil­lion? The doors are now open for another de­bate which has the po­ten­tial to be as loud and di­vi­sive as the ref­er­en­dum. The Ster­ling’s rally quickly faded on the Fri­day after the re­sult, and the FTSE 100, the UK’s key stock in­dex, closed just 0.3% higher, the ef­fect muted by the un­cer­tainty.

At present, UK in­vestors are look­ing again to the core fun­da­men­tals of the mar­ket and spec­u­lat­ing on a pos­si­ble in­crease in in­ter­est rates early next year.

In the long-term, the big­gest de­ci­sions lie with the politi­cians. MPs must of­fer an­swers and pro­vide a sta­ble out­look for the ben­e­fit of cit­i­zens and busi­nesses. It is their re­spon­si­bil­ity to en­sure that even if cer­tain pow­ers are lo­calised, the coun­tries ben­e­fit from be­ing united. The de­bate about de­vo­lu­tion must not be al­lowed un­der­mine the strength of the UK’s sin­gle mar­ket and its shared cur­rency.

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