After the market closed higher on the day of the EU referendum, 24th June saw the pound make its biggest drop in 31 years.
The UK’s decision to leave the EU sees the country jump down the rabbit hole and there’s no way of knowing how deep it goes.
Sterling has already had quite a shock and there’s plenty of reason to believe this is only just the beginning.
After all, the UK’s decision to walk away from the EU wasn’t supported by two of its four nations.
Now that a new referendum on Scottish independence is on the cards we can expect years of uncertainty ahead for the pound.
The EU referendum serves as a poignant reminder of the limits to democracy in the United Kingdom.
The Scots were required to vote in a referendum they didn’t want, called by a PM they didn’t elect, and forced to live with an outcome they didn’t choose.
Every Scottish constituency came out in favour of staying in the EU and yet they’re dragged out by England (with a little help from Wales).
Scottish First Minister Nicola Sturgeon is therefore completely within her right to explore all possibilities to keep Scotland in the EU.
In her post-referendum speech Sturgeon stressed she has a mandate from the Scottish people to protect the country’s place in the EU. She also hinted a new vote on independence should be on the table.
Cynics will argue that the Scottish National Party secretly hoped for this result all along.
It doesn’t matter if it did. Until last week, the Scottish government didn’t have the leverage to call a new independence vote. Now it does.
Scotland may have voted to stay part of the UK in 2014 after last minute promises by the UK government – promises that were broken almost as quickly as the ones made by the Leave campaign in the EU referendum.
But a huge reason for many people to say ‘No’ to independence two years ago was based on avoiding uncertainty about EU membership, the NHS, and the economy.
Now, Scotland’s out of the EU, its NHS is far from safe with a Tory government, and the country’s plunged into uncertainty anyway.
In other words, the terms and conditions that kept Scotland in the UK before no longer apply. Taking the Scots out of the EU against their will is a game changer.
As such, Sturgeon’s mentioning of Scottish independence should be interpreted as pragmatism.
The chances of Scotland staying in the EU whilst staying part of the UK are small.
European leaders will most likely treat the Scottish situation as an internal issue for the Brits. A deal with an autonomous part of a non-EU state would be extremely complicated.
Sturgeon is likely to find a new poll on independence the only way to keep Scotland in Europe.
An independent Scotland would have to apply to the EU as a new member state, but Scotland will probably be treated as a special case. Key requirements and legislation will already be in place so the accession process shouldn’t take too long.
The Scottish government will want to hold a referendum as soon as possible. This would help the rest of the UK, too.
After all, the UK would find it immensely difficult to negotiate its EU exit, not to mention trade deals on its own, as long as the country’s future hangs in the balance.
The prospect of the UK breaking up will bring a lot of uncertainty with it.
For sterling it looks like the Brexit decision was only round one. More beatings are coming.