Leading economist warns independence would see ‘day one currency crisis’

INDEPENDENCE could create a “day one” currency crisis on the financial markets that would cost households a fifth of their income, a leading economist has claimed.

Professor Ronald Macdonald said Nicola Sturgeon’s plan to keep the pound for years after a Yes vote was doomed to fail, as traders would force Scotland to adopt its own currency, with a devaluation of 20 to 30 per cent being likely.

He said: “These are big numbers and they will affect peoples’ wages and affect peoples’ mortgages.”

In her recent prospectus paper on the economy of an independent

Scotland, Nicola Sturgeon insisted the country could keep the pound for an indefinite period after a Yes vote, only adopting a new currency subject to a series of economic tests.

But on the ourmoney.scot website, which he has set up with pro-union businessman and Tory donor Robert Kilgour, Prof Macdonald said the First Minister’s plan would not survive reality.

The professor of macroeconomics at the Adam Smith Business

School at Glasgow University said the forced move to a new currency would hike the cost of imports, increase debt costs and lead to higher interest rates.

Households currently earning £35,000 a year would see their spending power cut by around £7,300, the analysis said.

This is based on imported goods costing £4,300 extra, interest rate rises of £1,500 and existing sterlingdenominated debts costing around £1,500 extra a year to repay.

The website includes a calculator suggesting how much people would lose, with only the highest of earners having more spending power under independence.

Prof Macdonald said: “You’re talking in my view of a devaluation of between 20% to 30%.

“The key thing the SNP is not telling people is that financial markets bring events forward. The crisis will be brought forward to day one of independence.

“It’s obvious why they don’t want to talk about what will happen on day one of independence.”

Mr Kilgour, founder of Scottish Business UK, said: “Prof Macdonald’s important work sheds light on economic plans that carry real risk not just for individual households but for businesses across Scotland.”

Pamela Nash, chief executive of

Scotland in Union, added: “There’s never a good time for a household to take a financial hit of this nature, but especially not through a worldwide financial crisis.”

The Scottish Government said: “The powers of independence would enable the Scottish Government to replicate the success of many neighbouring countries, which are more prosperous, productive and fairer than the UK.

“Scotland would continue to use the pound until conditions are suitable for individuals and businesses to move to an independent Scottish currency.”