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With Scottish independence vote, uncertainty abounds

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Should Scotland strike out independently from the United Kingdom? Scots will vote on that question Sept. 18.

In recent weeks, opinion surveys have shown surprisingly close levels of support for both the “yes” and “no” camps about the Scottish independence referendum. At the same time, financial analysts have issued opposing views about the consequences of a “yes” vote for investors in Scottish institutions.

When Scots go to the polls in 9 days to decide if their country should sever its ties with Great Britain, the world will be waiting to see if the "Yes Scotland," campaign has stirred up enough anti-London support. But advisors and investors will be focused on whether if by doing so, it will bolster or threaten the Scottish economy.

A lot is at stake. According to one estimate, this year investors have poured more than $9 billion into Scottish-based hedge funds alone. But, in early September, in a widely cited report, Kevin Daly, a managing director and senior economist for Goldman Sachs, issued a warning. If Scots vote yes, investors would sell Scottish-based assets, Daly argues.


But not all agree. Scotland might blossom if it leaves England’s embrace, they say. “Goldman Sachs Gets it Wrong for Scotland,” writes Michael Clouser, an Edinburgh-based blogger and doctoral candidate at the University of Edinburgh.

“Scotland itself may well prosper beyond the wildest imagination of the banksters if it implements good innovation policy,” he writes. Additionally, he argues:

Through immigration and innovation policy, Scotland could build a large pool of risk capital, especially venture capital, and the entrepreneurs to go along with it, most of who will come from non-EU zones in the world to build their companies in Scotland. Furthermore, through research and university policy and innovative funding mechanisms, Scotland could build a powerful knowledge economy through massive increases in the resources available to their universities and the exploitation of knowledge into new commercial ventures, including world-leading, innovative technology companies with great job-producing capabilities. Immigration policy can be leveraged to increase the supply of brains in the country as well. The synergies between all of the above could rock the status quo, creatively destruct, and create whole new industries on the global front.


And, during the same period of uncertainty ahead of the independence vote, Scottish-based ex-pats, have worried over unanswerable questions.

“We have gotten quite a few calls from people in Scotland,” reports David Kuenzi, the founder of Thun Financial Advisors in Madison, Wis., which specializes in helping ex-pat clients.

For his clients, the questions mount. Will a new “undefined nation” still participate in the U.S. and U.K. double taxation treaty that allows, for instance, his clients to treat their qualified U.K. pension plan as if it is a U.S. one?

Kuenzi has read of assurances given by the Scottish government officials that many such agreements will remain in place. But he takes such talk with a grain of salt as he does with claims that independent Scots could continue to use the British pound as currency.

“The Scottish government can say that,” he says, but the ultimate outcome hinges on the positions taken as well by other governments, including those in the U.S. and U.K.

All told, Kuenzi warns about Scotland’s potential independence: “This is raising substantial concerns,” for investors and for ex-pats living in Scotland; he warns against dismissing those concerns for clients.

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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