BlackRock warns over 'major uncertainties' of Scottish independence

Sun Mar 23, 2014 7:09pm EDT
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By Richa Naidu, Simon Jessop and William James

(Reuters) - BlackRock Inc (BLK.N: Quote), the world's largest money manager, warned that Scottish independence would bring about "major uncertainties, costs and risks" in Britain, becoming the latest company to join the debate on this year's referendum.

Scotland will vote on whether to end its 307-year union with England in September.

The British government has been campaigning fiercely to keep it intact, arguing that both countries are better off together, while Scotland's nationalists believe a split would give them the economic freedom to prosper.

"(A 'Yes' vote) would create risks for investors, corporations, savers and the UK economy," BlackRock said in a detailed report for professional clients, adding that investors in gilts, banks, utilities and energy companies would be most affected.

It said there could be limited pressure on gilt prices due to the small probability of Scotland finding it difficult to meet its obligations to England at some point in the future.

But weighing out the potential impact of independence on gilts in four scenarios, BlackRock concluded that there would be no material risk for Britain's debtholders unless Scotland defaulted on its share of the liability.

BlackRock said independence would raise regulatory costs for banks and insurers that would move employees to England to avoid having to pay additional fees to a new Scottish regulator.

Major banks would also question whether or not Royal Bank of Scotland (RBS.L: Quote) should remain based in Scotland, BlackRock said, as Britain's support to the bank since 2008 has totaled more than 210 percent of Scotland's gross domestic product.   Continued...

Chairman and Chief Executive of BlackRock Laurence Fink speaks during a session at the World Economic Forum (WEF) in Davos January 25, 2014. REUTERS/Ruben Sprich