Chairman of HSBC Douglas Flint has warned that if Scotland votes to become independent from the UK and leave the currency union would cause great economic uncertainty and “prompt capital flight from the country”.
Writing in a column on the Daily Telegraph, Flint said that being part of the sterling currency union has been one of the reasons Scotland has thrived over the years and that an alternative successful system has not been suggested yet by supporters of an independent Scotland.
“Those who suggest shunning the benefits of the status quo are advocating a giant step into economic uncertainty – we know what will be given up; the outcome is unpredictable. Even if the new arrangement is thought to be better than the state of affairs which preceded it, it must be sufficiently better to make up for the costs and uncertainties of the transition”, he wrote.
Flint noted that if Scotland decides to set up its own currency it would face a great challenge and take years to gain credibility on the financial markets. At the same time, joining the EU and the Euro would be “complex and fraught with danger”.
“At the extreme, uncertainty over the Scotland’s currency arrangements could prompt capital flight from the country, leaving its financial system in a parlous state”, he continued.
“This could, in turn, place enormous pressure on Scotland’s future fiscal policies. Scotland would give up the benefits of being part of a larger fiscal union with the stability that offers in terms of scale, diversification and fiscal transfers”.
Scots will decided in September’s referendum whether to leave the UK and become an independent country. Businesses and governments have so far argued on both sides over the possible consequences for the economy and companies based in Scotland.
Oil and gas reserves in the North Sea have also been a matter of discussion, with those pro-independence saying Scotland will benefit from them. However, many, including recently Sir Ian Wood, have argued that the reserves are highly overestimated and in decline.
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