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Scottish banks deliver blow to independence with threat to head south

The announcement of RBS and Lloyd comes as a new poll gives ‘no’ campaign a 6-point lead

The Scottish independence campaign received a potentially serious blow on Thursday, with the region’s two biggest banks saying they would relocate to south of the border should the country vote yes in next week’s referendum. In a further setback, a new survey indicated that would-be voters are edging toward a no vote in the tight race, with 53 percent of Scots now against splitting from the United Kingdom.

The results of the latest poll, conducted on behalf of the Daily Record newspaper, came hours after British Prime Minister David Cameron said he would be "heartbroken" if Scotland voted to leave the 300-year-old union.

But his desire to keep the U.K. intact may have been boosted by an announcement by Royal Bank of Scotland (RBS) and Lloyds Banking Group, owner of the Bank of Scotland, may relocate to England in the event of independence.

Such a move would serve as a significant loss to Scotland, given the financial sector's importance to the country’s economy.

The banks' announcements further added to perceived economic uncertainties that the yes campaign has had to fend off.

The RBS, based in Scotland since 1727 and the employer of 11,500 people there, said it had taken the decision because a vote for independence could affect its ability to borrow and a favorable credit rating.

"RBS believes that it would be necessary to redomicile the bank’s holding company and its primary rated operating entity [the RBS] to England," it said in a statement.

The bank, 81 percent owned by the British government, said the decision was part of contingency planning ahead of the vote.

The RBS, however, said it intended to retain a significant level of its operations and employment in Scotland to support its customers there and the activities of the whole bank.

Lloyds, 25 percent owned by the British government, said late on Wednesday its contingency plans for Scottish independence included setting up "new principal legal entities in England."

The banks had been reluctant to be drawn into the highly charged debate over Scottish independence for fear of alienating customers, but their statements reflect the increased chances that supporters for independence could win the vote.

Both banks had previously warned that Scottish independence would present a significant risk to their businesses, affecting their funding, tax and compliance costs.

Lloyds, which employs 16,000 people in Scotland, said it had responded to an increased level of inquiries from customers wanting to know about its plans following next Thursday's vote.

"While the scale of potential change is currently unclear, we have contingency plans in place which include the establishment of new principal legal entities in England," it said in a statement.

Ratings agency Standard & Poor's has warned that an independent Scotland would be unable to credibly support its banks if a new financial crisis struck.

The banks will have a period of at least 18 months after the vote to take whatever action they deem necessary while negotiations take place over the terms of Scotland's exit from the UK.

Other leading financial groups have also said they would react to a yes verdict. Insurer Standard Life, for instance, on Wednesday reiterated it could transfer business to England if necessary after the vote.

Al Jazeera and Reuters

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