Neither neat nor on the rocks for Singapore, if Scotland splits

A pro-independence gathering at George Square in Glasgow, on Sept 16, 2014. -- PHOTO: REUTERS
A pro-independence gathering at George Square in Glasgow, on Sept 16, 2014. -- PHOTO: REUTERS

A vote for independence in Scotland tomorrow could have some adverse consequences for trade with Singapore but the whisky should still get through.

A "yes" vote could generate some uncertainty over the property market in both Scotland and London, put some trade agreements in limbo and affect the pound, but the potential fallout is not seen as being overly risky for Singapore, say experts.

Even if the Scots vote to separate from the rest of the United Kingdom, it will be 18 months before they gain full independence, noted CIMB economist Song Seng Wun. Until then, it will likely be business as usual.

"An exit should not impede or significantly change Scotland's or Britain's trade or investment relations with Singapore," said Bank of America Merrill Lynch economist Chua Hak Bin.

Trade between Singapore and Britain stood at $14.3 billion last year, down 13 per cent from the previous year's. Trade agency IE Singapore does not have statistics for Scotland alone, but Dr Chua said "direct Scotland links to Singapore are probably quite small".

Among the main products that Singapore imports from Scotland is Scotch whisky, for which Singapore was the third-largest market last year with 66.8 million bottles worth £329.7 million (S$676 million) coming in, behind only the United States and France.

OCBC economist Selena Ling is not ruling out potential disruptions to trade and investment flows between Singapore and Britain, for instance, if a newly independent Scotland has to renegotiate tariff agreements.

But these will not occur immediately and will hopefully be temporary, so "whisky aficionados probably do not have to rush out to stock up yet", she quipped.

Singapore investors in British property will be watching the vote outcome closely. Property portal Rightmove has warned that a split by Scotland could jeopardise the country's housing recovery. "The very debate around Scottish independence and possible implications for the economic outlook for the rest of (Britain) could cause uncertainty," the firm's analyst, Mr Miles Shipside, told British newspaper The Telegraph.

Property consultancy Savills said Scottish independence is likely to have an impact on property values in Edinburgh and London, although it is premature to speculate on the details.

CIMB's Mr Song is sanguine, however. "Rather than despair, potential property buyers from Asia and the Middle East will be looking for bargains in London and Scotland," he said. "I don't think the long-term fundamentals or attractions of London, Glasgow, Edinburgh will have changed."

Cicero Group, a political communications firm that advises clients on global political developments, noted that while a major business impact on Singapore from Scotland's independence is unlikely, there might be temporary market volatility and pressure on the British pound.

"If the pound falls, this could impact investment into Singapore - it will become a relatively more expensive place in which to invest - and also could impact Singa-pore's exports to Britain, which will become more expensive," Cicero's Singapore-based executive director, Mr Andrew Naylor, said. But he added: "These are primarily due to currency pressures and would likely be short-term."

OCBC's Ms Ling noted that the uncertainty over Scotland's vote has already taken a toll on the pound. It has fallen about 3 per cent against the greenback and 2 per cent against the Singapore dollar in the last month.

Royal Bank of Scotland (RBS) and Lloyd's Banking Group, Scotland's biggest banks, have assured investors and customers of their plans to relocate their bases to England if their home country decides to separate from Britain.

An RBS spokesman told The Straits Times that this would mainly be a legal change, designed to provide certainty to investors.

"We expect no impact on our operations in Singapore," the spokesman said. "It remains business as usual for us."

fiochan@sph.com.sg