U.K. Pound recovers, stocks fall again on Scotland jitters

September 9, 2014, 11:47 AM UTC
A pro-independence supporter wearing a "Yes" tshirt shouts slogans as Scottish MP Jim Murphy addresses crowds in support of the pro-union "Better Together" campaign in Edinburgh on September 8, 2014, ahead of the upcoming Scottish independence referendum. Supporters of the United Kingdom began a fightback to stop Scotland voting for independence in next week's referendum after an opinion poll put the separatists ahead for the first time. AFP PHOTO/ANDY BUCHANAN (Photo credit should read Andy Buchanan/AFP/Getty Images)

The pound steadied but U.K. stocks continued to fall Tuesday as a new poll showed that the result of Scotland’s referendum on independence is too close to call.

Although the poll, by research firm TNS, showed a lead of one percentage point for the “No” camp, against independence, it reinforced the view that the “Yes” camp has made significant gains in the last month and could now win the vote.

It suggested a 37%-36% split against independence, with a remarkable 23% of voters still undecided with only nine days to go before the vote. That’s still basically bad news for the Unionist campaign, because recent polls have tended to show the bulk of undecided voters coming down in favor of independence.

The U.K.’s three largest political parties, the Conservatives, Labour and the Liberal Democrats, agreed on Monday to promise Scotland more powers over taxation and spending if it votes to stay in the U.K.

However, ‘Yes’ campaigners scorned the offer as ‘insincere’, and said it wouldn’t give Scotland the sort of meaningful control over revenue from North Sea oil and gas that only independence can bring.

Analysts at Deutsche Bank Tuesday warned against reading too much into the polls, pointing to the fact that they had overstated support for Quebec’s independence in a 1995 poll. But they also indicated that a win for the No camp would probably not be big enough to kill the idea of independence for good, as Westminster had wanted.

By lunchtime in London, the pound was around half a cent higher against the dollar at $1.6115, but that’s still down 2 cents from Friday’s close, before a poll by YouGov showed the ‘Yes’ camp winning. That pound had badly rattled financial markets, which had not taken the threat of separation seriously before.

The pound came off intra-day highs Tuesday after Bank of England Governor Mark Carney indicated in a speech that he won’t start to raise interest rates until next spring. Figures released earlier had showed the first quarterly drop in industrial out in a year and a half.

Carney warned later that Scotland’s plans for a currency union with the rest of the U.K. if it wins independence would be “incompatible with sovereignty.”

““You only need to look across the channel to see what happens if you don’t have all of those components in place,” Carney told an audience of trade unionists.

While the benchmark FTSE 100 stock index continued to fall, the companies based in Scotland which suffered the most Monday were among the better performers. The biggest losers were rather oil giants BP Plc (BP) and Royal Dutch Shell Plc (RDSB).

Although these companies might face particular legal risks and a higher tax burden in the North Sea under an independent Scotland, they appeared more under pressure from the sharp recent drop in oil prices.

Brent crude prices have fallen 15% in the last three months and hit a new 17-month low Tuesday, mainly due to fears about global oversupply.

(NOTE: This story has been incorporated to include Mark Carney’s comments about a post-independence currency union.)