Scottish Referendum: What next?

THE phrase I have heard most since the results of the Scottish referendum is ‘Thank goodness it’s over!’ Conversely, perhaps it has only just begun.

I am not a politically motivated person, and, like most people, I reserve a fairly cautious view as to what the politicians have to say because inevitably, there is self-interest and political nuance at work.

I think it is the influence on financial markets and the potential to impact on future plans that we need to think about.

The immediate effect was to see a strengthening of Sterling though equity markets hardly reacted. You may say that is because the expectation was for a ‘No’ vote, which had already been factored in. Had there been a ‘Yes’ vote, would markets really have reacted adversely? We will never know.

The focus will now shift to devolution of powers with all the political manoeuvring in preparation for the General Election in May next year. With that in mind, what can we expect from the Autumn Statement and March Budget? As always, there will likely be a softening of key issues relating to tax, designed to woo the wavering voter. I wonder if people really are as fickle as the politicians seem to think they are?

More important perhaps, will be the influence of UKIP and the debates about the potential recovery of some key controls from Brussels. From an economic perspective, however, the UK is in good shape and increased activity in equity markets is predicted, with some big flotations i the pipeline. Unemployment figures are down again and as confidence grows, people will be more inclined to spend – moving us forward.

Interest rates are likely to remain low for a considerable time yet. When they do start to increase, progress is likely to be very slow. This is frustrating news for investors, but the concern – as always – is the overall level of borrowing and the hit debtors would take if interest rates were to increase too rapidly.

The UK property market is slowly cooling partly due to restrictive mortgage lending – in itself better news – and overall, it should be an improving picture with some bumps along the way, of course.

My view is that if you have been holding back on some spending plans, or being cautious with your investments, now is the time to relax a little.
I am not advocating throwing caution to the wind with a spend, spend, spend strategy, but to sit on your hands is not the best way either.
Continuing restraint now may not only help to hold back economic recovery, but more importantly, it might mean you miss the best buying opportunities – some of which undoubtedly exist today.