Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Catalonia is starting to feel the Montreal Effect — before even deciding whether it will secede or not.

Top firms are weighing whether to leave the region, one of the richest in Spain, rather than face the risk of being cut off from the euro zone, the wider European Union and the international investment community in the wake of an unofficial referendum that Catalan leaders claim supports independence.

Political Parallels
Corporate head offices have trickled out of Quebec's biggest city in recent decades
Source: Institut du Quebec

Unilateral secession would be a brave gamble indeed given the referendum's illegality and lack of international support. Independence would be a “hard sell,” reckons Barclays, and there is no clarity on how and when Catalonia would carry out its threat to go it alone.

But that’s not stopped Banco Sabadell SA from deciding on a move of headquarters to Alicante after a board meeting held on Thursday, according to Bloomberg News. CaixaBank SA, meanwhile, is said to favor the Balearic Islands. One small drugmaker has already changed its legal domicile to Madrid from Barcelona. The share prices of all three rallied in sympathy on Thursday.

Shares of Spanish firms are recovering as they mull a change of address
Source: Bloomberg data

Bankers and investors say they’ve seen this movie before -- in Canada. Over the past four decades, corporate offices have trickled out of the French-speaking province of Quebec, which accounts for 19 percent of Canada’s GDP -- about the same as Catalonia. The separatist movement is only one of several forces at work, but it's a key one. Insurer Sun Life Financial Inc. pulled its headquarters out of Montreal in 1978, citing political instability and the introduction of new language laws. Between 1999 and 2012, Montreal lost nearly 30 percent of its head offices, according to one study. Even Bank of Montreal’s head office is in Toronto.

For companies based in Catalonia, secession would throw them into legal and financial turmoil: what would happen to their access to Europe's single market and regulatory entities? Both are vital for many non-financial corporations, such as pharmaceutical firms, which want to sell products region-wide with regulatory approval.

The threat to banks is especially potent. A messy divorce from Spain would see corporate clients likely move their cash outside the region. Consumers are unlikely to stand pat, either. Europe's explicit backing of Spain means that lenders' access to central-bank funding would theoretically be cut, too. Why take such risks with client money and shareholder confidence when the answer could be as simple as a change of address?

Spanish Bull
Spain's economic recovery has delivered impressive gains, but Catalonia is a pressure point
Source: Bloomberg Intelligence

Even if independence doesn’t happen, there’s a chance of grass-roots boycott movements and consumers cutting back. That alone would be reason to think twice about investments and the health of future business. One banker warns this is the kind of risk that could make an entire region un-investable. Strong words, perhaps, but the atmosphere is clearly tense, especially at a time when optimistic forecasters are expecting Spain to report its best economic performance this year since 2007.

As with Scotland's referendum in 2014 and the Brexit vote in 2016, European investors and businesses know contingency plans are worth making. But even if Catalonia holds back from the nuclear option, there’s a lot at stake in the face of prolonged political unrest. Capital may choose to take flight regardless.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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