Pound Sterling slides ahead of Scottish independence vote

By Erin Smith

Published: 08 September, 2014

The Great British pound sterling hit a five-month low of against the US dollar to close last week at 1.632 GBP/USD following reports of increased support for Scottish independence.

The Great British pound sterling hit a five-month low against the US dollar to close last week at 1.632 GBP/USD (xe.com) following reports of increased support for Scottish independence.

Additionally there was a sell off of the pound against the euro, which closed last week at 1.259. (xe.com)

The sell-off of the pound sterling followed the news that YouGov poll showed support for Scottish independence at that stage was gaining momentum.

Sterling could be set to continue to decline in value this week, with YouGov reporting that support for Scottish independence took its first lead in the polls since the campaign began this weekend. According to the poll those in favour of Scottish independence had 51% of the votes, while those that opposed independence had 49% of the votes.

The final vote is set to be held on September 18.

Several large Scotch whisky producers have come out against an independent Scotland as they feel it may destabilise a relatively prosperous period of growth for Scotland. Primarily the uncertainty surrounding the economic and financial ramifications of the move and concerns over what it might mean for business, is unnerving for producers. On the flip side those in favour of independence argue that oil wealth and having state control over public amenities including the National Health Service are financial advantages to an independent Scotland.

The big question still remains what currency Scotland may adopt should the independence vote pass? The leaders of several of the major political parties have stated that they would not support a formal currency agreement with an independent Scotland.

This could be a challenge for Scotland as a requirement to become an EU member is that a candidate country have its own monetary authority - a necessary instrument needed to commit to the Economic and Monetary Union Treaty of EU membership.

A letter published in the Scotsman newspaper last month, written by 133 business leaders including several high profile Scotch whisky producers, argued that: "Uncertainty surrounds a number of vital issues including currency, regulation, tax, pensions, EU membership and support for our exports around the world; and uncertainty is bad for business."

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