May’s Scottish referendum roulette spin with election call

UK prime minister Theresa May’s shock general election call on Tuesday may be a calculated attempt to crystallise the Conservative Party’s strong opinion poll lead into actual seats at Westminster — but she could simultaneously weaken her strong stance against a second Scottish independence referendum. That would be bad news for anyone hoping for a favourable outcome for the UK’s economy and financial sector in the Brexit negotiations.

  • By Craig McGlashan
  • 18 Apr 2017
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While announcing her plan, May said that her reason for calling the election — having previously said she would not hold a snap vote — was due to opposition parties stifling her government’s plans for Brexit.

But it is one of those parties — the Scottish National Party — that could lead May to a pyrrhic victory.

The SNP dominates Scottish representation at Westminster, holding all but three of the country’s 59 seats. Improving on that performance in the election in June would be hard, but it could well do better than the 50% share of the vote it achieved at the last general election in 2015 — particularly as it has used the fact that Scotland voted against Brexit as its main argument for calling for another independence referendum.

If the SNP gain well over 50% this time, how could May maintain her stance that “now is not the time” for a second independence vote, when more than half the Scottish electorate had effectively voted for a party that, in May’s own words, “say they will vote against the legislation that formally repeals Britain's membership of the European Union”?

Being faced with strengthened calls for a second Scottish independence referendum would weaken May’s hand in her negotiations with the European Union — and that could have knock-on effects for both Gilt valuations and the future of the City.

A Moody’s note on Tuesday said: “The negative outlook on the UK’s sovereign rating indicates that its future path will be mainly driven by the outcome of the UK’s Brexit negotiations with the European Union as well as by fiscal developments, given the UK’s comparatively weak public finances.

“Moody’s will assess the implications of the proposed election, should it occur, for those drivers as events unfold, including whether the election or its aftermath are likely to prove a distraction from the Brexit negotiations, given the limited time frame available.”

If a distraction in the form of a general election is going to be problematic for the Brexit negotiations, it will be doubly so — and for longer — if in the background there is another independence campaign underway. And if May stands firm and rejects the SNP’s calls, there will be an almighty distraction from SNP voices claiming that the government is ignoring “the will of the Scottish people” — especially when the will of the British people is supposedly what is driving the government to its preferred outcome of a ‘hard Brexit’.

With other European cities eyeing up London’s financial services business, a new Scottish independence referendum would also give them a strong hand. With most Scots, and the SNP, wishing to remain in the EU, it would be a chunky bargaining chip for the EU to say: “Give us some of your financial services business and we’ll make it difficult for Scotland to get back into the bloc after independence”, helping the UK survive in its current form, but at the cost of a major hit to the country’s finances.

May’s predecessor David Cameron took a historic gamble for purely party political purposes by calling for the EU referendum in the first place. May’s punt may not be so large or foolhardy but if the last year has taught us anything, it’s that there are no longer such things as odds-on favourites.

That the UK’s financial health and the future of the City are again being used as the subject of a party political gamble by a Tory politician — one that campaigned in favour of staying in the EU, no less — shows what little regard the country’s government holds for either.

  • By Craig McGlashan
  • 18 Apr 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 282,641.19 1046 9.01%
2 JPMorgan 257,395.97 1177 8.20%
3 Bank of America Merrill Lynch 251,828.32 868 8.02%
4 Goldman Sachs 192,523.13 618 6.13%
5 Barclays 184,453.95 705 5.88%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 HSBC 28,971.26 117 7.00%
2 Deutsche Bank 27,415.35 91 6.62%
3 Bank of America Merrill Lynch 25,509.39 71 6.16%
4 BNP Paribas 21,884.21 122 5.29%
5 Credit Agricole CIB 19,966.59 113 4.82%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 13,671.74 61 7.86%
2 Citi 12,076.06 76 6.95%
3 Morgan Stanley 11,899.85 66 6.84%
4 UBS 11,800.30 47 6.79%
5 Goldman Sachs 11,111.93 58 6.39%