Scottish-only stock market would ‘underperform’, report finds

Leading academics have created a ‘Scottish-only’ stock market index in anticipation of the Scottish independence referendum – with worrying results when it was compared to other UK equivalents.

The ‘Scotsie 100’ index is made up of 100 firms that have headquarters in Scotland, but are currently quoted in London – with comparisons made up over the last 60 years. These include Alliance Trust and Scottish Mortgage.

The report found that £1 invested in the Scotsie 100 in 1955 would have grown by £648 today, with dividends reinvested. That is a 5.7% increase in returns, with inflation adjustments. In comparison, £1 invested in the rest of the UK would have grown to £1,168, a 6.8% increase.

The report also included the widespread impacts of the Royal Bank of Scotland (RBS) and HBOS banking crash, which would have a major impact on the supposed success of the Scotsie 100 – suggesting that if these shares were removed, the Scottish stock market could have outperformed the rest of the UK.

Paul Marsh, of the London Business School and co-author of the study, said, “We have examined the implications of a ‘yes’ vote for Scottish companies and investors, including issues of currency, taxation, EU membership, and regulation.

“We believe that investors in Scotsie 100 stocks should not be unduly concerned, nor should they be making contingency plans to rebalance their portfolios.”

He added, “To some extent, they are protected by the fact that both companies and individuals can re-domicile if necessary. There would also be a period of at least 18 months during which the terms of separation are negotiated. They can afford to wait and see.”

If the Scottish independence referendum goes the way of the yes vote, Scotland could have its own stock market again – for the first time in 40 years. The Glasgow stock exchange was originally merged into the London Stock exchange in 1973.

Photo source: Barney Moss via Flickr

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