5 indicators of growing certainty on currency union with Scottish independence

Written by Michael Gray

Scotland's strong fiscal positionRecent interventions in the media have demonstrated a growing economic consensus behind a continuing currency union following independence.

The common sense economic position for business and government both north and south of the border is to maintain trade in a uniform currency to the benefit of all parties.

The markets recently pressured the UK Treasury to confirm that Westminster will ensure its debt repayments. The UK Government has issued the bonds that make up the UK’s debt’s so the UK Government is legally responsible for paying them.  By creating confusion over debt the No Campaign hopes to gain an advantage in the referendum campaign. The UK Government’s ambiguity has itself forced the markets to ask for clarification.  It is probable now that pressure will grow on the Treasury to confirm its support for a continued currency union.

Well respected economic experts like Professor Andrew Hughes-Hallet have said that UK Chancellor George Osborne’s scepticism towards and unwillingness to discuss a continued currency union is “political posturing” that won’t last a day after the referendum. Aside from political point scoring, there is a great deal of certainty that all parties will agree to a mutually beneficial continuation of the currency union. What matters is the economics of mutual interest.

1. The Governor of the Bank of England has proposed currency talks

Mark Carney, the new Governor of the Bank of England, has offered to discuss setting up a currency union with the Scottish Government.  He told reporters that “there has been an effort to set up a meeting” and that he is “sure it will happen at some point.” The meeting is expected to take place very shortly.

2. The Treasury has started planning for the financial implications of an independent Scotland

In response to market pressure, the UK Treasury confirmed it will maintain the liability on all UK debt in the event of Scottish independence.  This matches the common sense position outlined in the Scottish Government’s White Paper which states that although the debt officially belongs to the rUK, Scotland will contract to pay a fair share of the debt as long as it receives a fair share of the UK assets (in line with international law).

This was the latest signal that the Treasury has plans for the transition and negotiations that would follow a vote for independence.  It is common sense and simply proper planning for the Treasury to start the process now for establishing a currency union following a Yes vote.

3. Financial institutions agree that a currency union is mutually beneficial

Currency traders in some of the world’s largest financial institutions support a currency union between Scotland and the rest of the UK. Oliver Harvey, strategist for Deutsche Bank, described a Scotland-rUK Sterling arrangement as an “optimal currency area”.

Valentin Marinov, the head of European Group-of-10 currency strategy at Citigroup added: “Given the close economic ties between the two and assuming that these ties need not weaken going forward, the potential introduction of a currency union need not affect significantly trade and other flows.”

There is already evidence that international financial organisations value the stability that a currency union brings following independence. This evidence is impossible for the Treasury to ignore, even as its ministers play politics for the next few months to the referendum.

4. Economic experts support a currency union

The independent Fiscal Commission Working Group of globally renowned economists produced a considerable report into the macroeconomics of an independent Scotland conclusively supporting a currency union. Economic advisors both in rUK and internationally agree that a union will provide an optimal area for trade and business.

5. Ed Balls supports mature talks after independence

This week the Shadow Chancellor Ed Balls continued the move towards a mature, reasonable and common sense approach to the continuing currency union despite still campaigning against independence.

In a press interview he proposed meeting with the Scottish Government to discuss currency and stated that he would honour the principles of the Edinburgh Agreement to work together sensibly after the referendum, if he is elected Chancellor for the rest of the UK at the 2015 Westminster General Election.

We call that stating the obvious – or possibly forgetting to bluff!


There is a growing economic consensus amongst truly objective sources in support a currency union between Scotland and the rest of the UK after independence. While there will be further politically motivated statements from Westminster and No Campaign supporters in the months ahead, the economic facts all lead back to establishing a currency deal. This is bad news for supporters of independence who support an independent Scottish currency but Gordon MacIntyre-Kemp the CEO of Business for Scotland has claimed that it is a credible plan B and could even work out better for Scotland in the long run if there was no currency union.

The main question on currency is when will George Osborne and the UK Government recognise this reality?

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About the author

Michael Gray

Michael is Head of Research with Business for Scotland.

A graduate from the University of Glasgow, he has carried out a series of interviews with academics, politicians and the public in Denmark, Iceland and Ireland. Michael's on twitter @GrayInGlasgow.


  • Hi Mr Kemp,

    In your opinion what would the problem be if Scotland were to adopt a separate currency and align it to sterling on a transition phase for say 6-8 years for sake of stability and no additional exchange costs?

    In the future businesses could go on using sterling for trade purposes with the rest of the UK without Scotland having to be in a trade union, after all it is a convertible currency like the euro and US dollar (I have been to a few countries where this is done for trading purposes).

    Please notice I found these ideas in the just published No Place for Fear II by Jim Sillars.

    Why has no one spoken about this possibility which in my eyes would solve the currency dilemma, currently used by the No Campaign for scaremongering undecided voters.

    BTW I would suggest you read the book by Sillars, which is very short, yet gives pragmatic solutions for a new nation which Scotland hopefully will be very soon.

    • Euro, Pound Sterling or Scottish Pound?

      You cannot enter into or maintain an existing currency union without the long term commitment that the markets need. a half commitment would cause real uncertainty not the faux uncertainty of the No campaign. If we commit we should commit and if in the much longer term circumstances change we can elect a government that has different ideas on monitory policy. But i see the currency union lasting for a very long time as it will be overwhelmingly in everyones interest in the Uk to make it work.

  • HI Mr Kemp, I hate to disillusion you about anti-English views in Scotland. An anti English poll in the Daily Record found 66% of those questioned agreed with the statement “Many people in Scotland are anti English.
    Another article in the Scotsman “Anti Eenglish bile shames Scotland”. In yet another article from The Independent said “A new survey reveals two out of three
    reveal anti English feelings”. If you still dont believe this, read some comments on articles in the quality Scottish Press.
    On the rUK side you get letters saying “Does this government have a mandate to allow Scotland to jeopardise a currency that the rest of us use”. another “To protect the rest of us and to properly inform the Scottish electorate.Should it not be made clear now that a yes vote means a clean and immediate break on all fronts”.
    I believe a yes vote will not lead to a velvet divorce.

    • The Scotsman the Record and the Independent spreading no campaign propaganda will surprise no one. There is as much anti Scottishness in England as there is anti Englishness in Scotland. If you truly believe 2 out of 3 Scots are anti English then you must concede that possibly a majority of them are no voters? Since this campaign began I have never heard anyone – not one person on the Yes side say anything about the English. This is a battle between the people of Scotland who have a plan for Scotland’s future a roadmap to make it a better fairer country and those who have no confidence in our nation.

      Most English people I know living in Scotland are voting Yes.

      • This is not true you know. I grew up in Glasgow but have lived in London for many years now. There’s not much anti-Scottish feeling down here. Not much Scottish feeling at all really. The truth is that they don’t care. Not much coverage in the papers. Very little on the TV either.

        That’ll change very quickly after a yes vote. Then don’t kid yourself that negotiations will be easy. It would be political suicide for a government here to unconditionally become LOLR for Scotland. You were listening to Carney?

  • A shared currency depends on the will of people in both Scotland and the rUK. The benefit to the rUK is far less than to and independent Scotland. The feeling I get south of the border is that the people in the know think the SNP want the benefits of independence with the selected benefits of the union at the same time. This I believe is not acceptable to most of rUK voters. Remember there is a UK general election in 2015 I would not like to be in charge of a political party trying to sell a shared currency policy to the voters of rUK.

    • The benefit to the rest of the UK is huge – we already have a currency union between Scotland England Wales and Northern Ireland, the benefits to the Sterling areas balance of payments of having oil and energy and food and drinks exports from Scotland £40bn in sterling is immense. Without Scotland experts the pound would be in danger of tripping overs the balance of payments cliff and could be subject to massive fluctuations in value – there is no plan B for the rest of the UK either.

      71% of the people of the rest of the UK polled by pannalbase said they wanted Scotland to keep the pound if it becomes independent only 12% said no – its an easy sell once the politicking gets out of the way.

      • Mr Kemp, were the people polled by pannalbase told of the problems associated with a currency union between two foreign countries, I doubt it.
        So you are also implying without Scotland’s input the rUK will be bankrupt, I some how doubt it.The first foreign country to be it hardest by any collapse of the pound would be Scotland. 60-70% of Scotlands exports go to the rUK and 10% of the
        rUK’s go to Scotland. The biggest number of tourists going to Scotland are from the rUK and the largest number of customers for Scotlands finacial industry are also from the rUK. You say currency union is an easy sell, I think not, do not rely on snap polls.
        I thought one of the objects of an independent Scotland was control of finance. Given the likelyhood of the Scottish and rUK economies diverging the sensible thing would be for an independent Scotland to be able to exert full economic independence would be to start using its own currency as soon as possible.

        • 1) You miss the point that the UK is actually pretty much already bankrupt and without QE would have needed a bail out.

          2) Yes rUK is most important market so you make the case for maintaining the currency union – also Scotland is most important market for rest of UK so that makes the case for maintaining the currency union.

          3) If sterling did collapse and Scotland had its own currency yes it would hurt Scotland but RUK are are best friends and we don’t want that to happen to them hence the case for currency union.

          • Mr Kemp, I dont see much friendship in the comments I read in a lot of the Scottish Press. You say the UK is actually pretty much already bankrupt then a currency union with Scotland is not going to change the situation much. A currency union with a country with a planned lower rate of corporation tax and a policy of trying to attracted industry from the rUK would have to be put to the rUK electorate. The nastiness from some Scots Nats towards England and the English is another factor which effect negotations between the two countries.

          • I have never seen any anti Englishness in the campaign at all, I am anti Westminster, my home town is Hexham in Northumberland, you won’t find any anti englishness here.

            If you don’t think the UK is broke you just simply don’t understand the economics of the situation. Have a look at this from Monney Week

  • A currency union is not a certainty. The BOE governor gave a warning that an independent Scotland needs to cede some sovereignty for a currency union with the rUK. Raising fresh doubts over the SNP’s pledge that independence would give Scotland responsibility for all economic levers.

    • Hi Donald the Scottish Governments white Paper suggests sharing a central bank and having shared regulation of the banking sector etc. So the Scotland’s future publication actually states that some sovereignty would be shared. Separation isn’t on the ballot paper but an intelligent modern dynamic independent, interconnected and interdependent partnership with all the right levels of sovereignty share and all the ones we need control over transferred to Scotland.

      Carney essentially said what ever you decide we will implement as your central bank but don’t try to use currency without the right structures – in others words I agree with him and he seems to agree with the White Paper!

      You can have a great deal of certainty about the continuation of the existing currency union after independence.

  • I think that political honesty would prevent a lot of worry for all the people of these islands.A currency union is going to happen because it is the only thing that makes sense,all the “lies” or insinuations that Scotland “cant” or Wont” be able to share or must apply to join the EU or Nato, they just say whatever they can to cause fear.

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