Analysts fear the worst after Scottish independence

Scottland vs BritainFinancial analysts have generally focused on the negative effects of Scotland seeking independence from the UK after a referendum on September 18.

Nick Beecroft, a senior market analyst at Saxo Bank, says a "yes" vote would undoubtedly lead to "short-term mayhem".

"Sterling and gilts will come under severe pressure, with the distinct possibility that sterling suffers a fall in the range of 10-20% against a dollar," he writes.

Beecroft says he fears at least three years of uncertainty as an independent Scotland works out what currency it will use. A currency union with the UK has been ruled out, and the other options such as joining the euro or "sterlingisation" are, he says, undesirable.

An independent Scotland would also worsen the UK's current account balance, says Alasdair Macdonald, UK head of advisory portfolio management at Towers Watson.

Without Scottish oil revenues, the current account deficit of the UK, excluding Scotland, would rise from 4% to up to 7%, the worst in the G10 set of developed economies, he estimates.

Macdonald says this and other concerns about uncertainty could cause capital flight from both Scotland and the UK, which could see the value of sterling fall by more than expected.

This capital flight, if significant, could lead to a recession, says a paper by SEI Institutional. Separately, an independent Scotland would need to borrow money by issuing its own bonds, and would have to seek a credit rating that may be lower than the rest of the UK.

"There are significant questions that remain unanswered," adds the paper, which outlines a number of concerns for Scottish pension schemes. "Will they be eligible for pension protection? Which metrics would be used to measure inflation? Would the liabilities of the schemes be linked to Scottish bonds?"

The latest poll by survey company YouGov anticipated that 52% of Scots will vote "no" to independence.

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