08.09.201403:54:05UTC+00Independence vote for Scotland could cost pound 10% in value

A vote in favor of Scotland’s independence could drive the British pound down by 10% to bring it back into levels last seen during the recession.

Market analysts claim that an accelerated decline for the pound is likely to happen should the yes vote start to gain more ground against the no vote in Scotland. The currency has already went through its largest drop in over a year last week with investors becoming nervous after preliminary polls showed a close battle between the two Scottish camps. During most of the month of July, the sterling was trading against the US dollar at levels above $1.70. Since that time, however, it has fallen near to $1.63 with another 10 cent fall incoming should the independence bloc move ahead.

Chief economist Howard Archer from consultancy firm IHS Global Insight predicts that, "Sterling will highly likely remain vulnerable now until the referendum on 18 September. Just how difficult the pound's coming week will be depends on what polls show over the coming days."

Apart from the narrowing vote gap, the potential resulting years after independence is also threatening the pound by leaving business communities uncertain as to what currency will be employed by Scotland and what the repercussions will be. Berenberg Bank’s chief UK economist, Rob Wood, says that while a deal could be made regarding the use of Scotland of Britain’s currency, the negotiations could prove to be costly and damaging for both sides. Wood cited the example of the possibility of financial institutions and other companies relocating their “headquarters and parts of their business south.”