In just over a week, four million voters to the north of England's border will be asked: "Should Scotland be an independent country?"
Even a few months ago, the prospect of the Scots voting to break up the 300-year-old union was unthinkable to all but the most enthusiastic supporters of the “yes” campaign. In just a few days, however, Scottish independence has become a real possibility. Voters cast their ballots on September 18th but the result is too close to call.
The resulting panic has seen sterling tumble on the foreign exchanges and several billion pounds wiped from the stock market value of companies headquartered in Scotland or with large operations there.
Like the politicians in Westminster, almost all the City of London’s economists, analysts and investors had been blithely assuming the union would survive the vote by a comfortable margin. Until last weekend, that is.
In a poll published by the Sunday Times, the "yes" campaign led by the Scottish National Party's Alex Salmond was shown to be in the lead for the first time.
According to the YouGov survey, the "yes" campaign will win 51 per cent of the votes, with the Better Together campaign, fronted by former chancellor Alistair Darling, at 49 per cent. Just a month earlier, the pro-unionists had a 22-point lead. That poll was followed yesterday by a survey by TNS that put the two sides neck and neck.
Sterling hit a 10-month low on the foreign exchanges as the City struggled to digest the implications. There are many uncertainties over what an independent Scotland will mean for the UK but money is at the heart of them – what currency will the Scots use if they vote to break away?
The three main political parties in Westminster are opposed to Scotland keeping sterling but Salmond insists it will continue to use it. That would leave the new nation without its own central bank and thus unable to control its monetary policy.
Bank of England governor Mark Carney waded into the debate yesterday. He said a successful currency union required cross-border agreements on tax, spending and banking rules. "You only have to look across the continent to look at what happens if you don't have these components in place," he said. "A currency union is incompatible with sovereignty."
City strategists presented a grim picture of the consequences if the yes camp gets its way, with Nomura warning of a “cataclysmic shock” that could see sterling fall as much as 15 per cent – or further if Scotland’s “divorce” proves messy. Analysts at Credit Suisse issued a warning that Scotland would face a “deep recession” if it went its own way. But the panic in the City has nothing on the hysteria in Westminster, where the prime minister ordered that the the Scottish flag – be raised above Downing Street in a show of support for union.
Pro-union campaigners called on the Queen to issue a plea to Scottish voters to head off the crisis. There was one impressive show of unity, although it was hardly reassuring. The three main party leaders – David Cameron, Ed Miliband and Nick Clegg – agreed to ditch Prime Minister's Questions at the House of Commons today and go to Scotland in a last-ditch attempt to save the union. Fiona Walsh is business editor of theguardian.com
