Here’s another thing for investors to worry about: The very real chance of a new independence referendum in Scotland.
Scotland’s First Minister Nicola Sturgeon committed on Monday to seek approval for a second referendum, throwing a massive wrench into Britain’s efforts to prepare for a future outside the European Union.
Sturgeon, the leader of the Scottish National Party, has argued that her nation is being pulled out of the EU against its will. In June, 62% of Scots voted against leaving the EU.
Scotland voted against independence in 2014, but Sturgeon said that circumstances have now changed. Prime Minister Theresa May, for example, has made clear that Britain will be leaving the EU’s single market as a result of Brexit.
May’s government did not welcome Sturgeon’s call for a second independence referendum, saying in a statement that it would be “divisive and cause huge economic uncertainty at the worst possible time.”
It would certainly result in economic uncertainty: Scotland would have to figure out everything from which currency to use, to how to manage trade with the rest of the U.K., and what to do with its share of the national debt.
Here are the biggest unknowns:
1. Currency question: An independent Scotland would have to decide which currency to use. Those campaigning for independence in 2014 suggested it should continue to use the pound in a currency union with England. But U.K. lawmakers said they were not ready to share.
At the time, the pound was trading near $1.65 against the dollar. It has since dropped 26% to trade at $1.22.
Another potential option would be Scotland to join the euro. That’s easier said than done: Scotland would most likely have to apply to join the EU as a new state.
2. Finance: It’s unclear what would happen to Scotland’s finance industry if it decided to fly solo.
Edinburgh is the U.K.’s second largest financial center after London and home to a cluster of asset management companies. The Royal Bank of Scotland is headquartered there.
Many of the biggest banks threatened to leave the country if Scotland voted for independence back in 2014, but the tide has shifted since then.
If independent Scotland somehow managed to stay in the EU, it could become an attractive alternative to London for banks seeking to safeguard their European operations after Brexit.
3. Oil: The U.K. is the largest oil producer in the EU, and about 90% comes from areas that are likely to be claimed by an independent Scotland.
In 2014, the Scottish government estimated Scotland’s remaining oil to be worth about £1.5 trillion. However, the price of oil has since fallen from $100 per barrel to below $50.
Even back in 2014, the U.K. government said the oil was worth less than one-tenth of the figure quoted by the Scots.
4. Debt: Scotland runs a major budget deficit at almost 10% of GDP, according to the Institute for Fiscal Studies. Facing low oil prices and without the support of the rest of the U.K., an independent Scotland would have to look for revenues elsewhere or cut back on spending.
The question of how to manage Scotland’s share of U.K. debt would also need to be addressed. If there was a split, an independent Scotland could owe Britain as much as £150 billion — its share of the debt based on population.