Seven Investment Management co-founder Justin Urquhart-Stewart has warned of a “viscous and declining” economic cycle emerging in an independent Scotland on pro-union campaign Vote No Borders.
In an article for the Vote No Borders website Urquhart-Stewart argues that becoming independent would see Scotland walk away from “all the benefits of the economies of scale” which currently exist in the UK.
The threat that Scotland may also refuse to take on its share of UK debt, which Urquhart-Stewart describes as “thoroughly irresponsible”, if Westminster does not agree to share the pound could also affect crucial confidence in an independent Scotland’s economy.
He says: “We must remember that there is one word that runs an economy and that is confidence. Without that vital element, expenditure drops off, investment falls away and the economy’s virtuous circle turns into vicious and declining cycle.
“Thus when I hear the First Minister of Scotland in his last debate with Mr Darling, make reference that he could renege on its government’s debt obligations, then we are dealing with a very worrying element.
“Countries that default on their debt, or even threaten to do so, will suffer very quickly the wrath of the investing community.”
Urquhart-Stewart draw parallels with Argentina and Greece where defaults have resulted in difficulties with attracting new investors while the cost of debt goes up on the perception that the country is now higher risk.
Further devolution would prove a more attractive option for Scotland than becoming an entirely independent country, according to Urquhart-Stewart. He adds: “I personally am a firm believer in the efficiency of devolution, and even more devolution to ensure that tax raising responsibility is tied and aligned with expenditure. ”
Former UK prime minister Gordon Brown yesterday unveiled a timetable for how and when Scotland would be given further devolution, including additional borrowing powers for economic investment and more power over income tax, if it votes to stay in the UK on the 18 September 2014.