The UK’s economic growth would drop by almost a whole percentage point next year if Scotland votes for independence, according to leading investment group, Axa.
The group said that GDP growth would likely drop below 2%, down from the current forecast of 2.7%.
Growth this year would also be affected by a ‘Yes’ vote, falling by about a quarter of a percentage point to below 3%.
Having said this, Axa predicted that growth would recover in 2016 to 2.25%, in line with its earlier forecasts.
David Page, a senior economist at Axa, said:
“We conclude that the high level of uncertainty surrounding the separation of the United Kingdom would have a marked impact on the growth outlook. Primarily, this would occur through a significant deceleration in business investment growth.”
The effect of reduced growth would likely stall interest rate rises, harming the price of sterling and reducing gilt yields.
Supporters of the ‘Yes’ campaign say that a currency union would limit the negative impact of a split on the economies of both nations.
However, the Governor of the Bank of England, Mark Carney, disagrees, pointing to the failing eurozone as evidence.
A final worry surrounding Scotland’s future is ‘capital flight’ – companies withdrawing investments from the London stock exchange in fear of the uncertainty that a ‘Yes’ vote will inevitably bring.
Image by Màrtainn MacDhòmhnaill