Scottish Referendum vs. UK Election: Return of the IPO

In the last 12 months, two political events have succeeded in concerning the CityFirst the September 2014 referendum was called on Scottish independence, and brought with it a wave of populism not seen for generations. With the SNP and the calls for an independent Scottish state, came the first internal threat to the makeup of our country for centuries, and with this threat, came fear. Fear of a devalued currency, fear that the face of commodities in the UK was about to change, and fear that some of the Country’s great companies were going to have to be described as ‘English’ or ‘Scottish’ rather than the ‘British’ in which they had revelled.

Having attempted a feigned indifference for over a year, financial institutions finally scrambled to limit the damage. The first noticeable victim was the value of the Pound. Having stood strong against the Dollar for some time, it saw a sharp decline to a then seven month low. Next, an almost overnight drying up of IPO work. Concerned by uncertainty, the roadshow wheels grounded to a halt, with businesses deciding to take to the water once a yes / no decision had been made.

Following the no vote, an audible sigh went up in EC2. Within a week, £3 billion’s worth of deals were mooted. From Aldermore to Jimmy Choo, there was a spring in the step of the City again. However, with the election this month, the City again came to a juddering halt. Populism had been caught south of the border, and following the SNP into battle was UKIP, another party not ruled by sense, but by ideals. Between them, and their disruptive might, they threatened to turn the 2015 general election into a fight from which it seemed there could be no winners. With a hung parliament seemingly an inevitability, the bids to woo bedfellows became more important than offering the country sensible policies.

For several fear inducing weeks, especially to the world of finance, it seemed that the only realistic solution able to get over the line would be a Labour/SNP coalition. Even the Conservatives, for years the bastion of business, had to make drastic anti finance moves to appease the blue collar workers it has promised to help. The banking levy, recently raised from 0.156% to 0.21% of all debt held in UK banks. Seemingly inconsequential, but has seen HSBC, one of the country’s leading institutions, making unveiled threats to leave the UK, reverting to its original headquarters of Hong Kong. From the thought of insecurity, markets all but closed. For almost a month, the City was devoid of many IPO’s with companies being warned by advisers that their fundraisers would be very difficult. The Stirling plummeted again, with many believing that $1.40 would have been more than possible if ugly scenes and recrimination had followed on 7 May.

However, markets are resilient, and populist parties live and die by the frenzy they create. UKIP, at one point claiming potential victory in 40 seats, came away with only a solitary voice, Carswell in Clacton, with even their leader barred from Westminster by the voters of Thanet South. Even with the SNP’s astonishing numbers north of the border, the unexpected rout of Labour around the country led to a combined total of 288, nowhere near enough to damage the Tories. In achieving 331 seats, David Cameron achieved something that no PM with over 18 months experience has done since 1900, increasing his margin of victory from the start of his incumbency.

From this, the City took heart. Money and goods has been traded within its walls since the Roman’s first came to this country, and the election could never truly stop this. World Wars, disease, and political turmoil far greater than that seen today have not immobilised finance, only pausing it, and therefore, the only likely casualty of this election will be the bankers’ summer holidays. Hindsight of the Scottish referendum shows us just how quickly institutions can dust themselves off. History is a long study of applying hindsight to the future, therefore, come Summer, the wheels will be turning once more. With promises of floats already abounding, the City is already leaving the election behind.

Nevertheless, there is one final caveat. During the last parliament, the Conservatives, in a bid to appease their back benches and the increasing Eurosceptic population, promised an in/out EU referendum by 2017. This leaves the City in quandary. Nearly three quarters of those working within the Square Mile plan to vote in favour of staying within the European Union, and yet, as with the Scottish referendum before it, fear will descend on the City and quite possibly global markets again. With his slim majority, Cameron is acutely aware of his potential ‘bastards’ – Rees Mogg, Bone, Davies – all back bench heavyweights and therefore able to wield power in the future. Mark Reckless, the Eurosceptic and UKIP defector who was recently ousted from his seat in Rochester and Stroud, must be looking at the power his former colleagues now hold longingly. For this entire election, the public were sold a story that it would be the outside powers who would force the issue, the days of majority were over, with small parties for the first time ever holding the keys to Number 10. Ironically, the biggest threat to the City’s interests are now not from a raging bunch of Scottish and anti- EU populists desperate for financial blood, but in fact the very Government that EC2 was so happy to elect.

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