Scottish referendum results: What does 'No' vote mean for the UK economy?

There is unlikely to be a post-referendum bounce

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What’s the opposite of Armageddon? Many forecasts of the economic implications of a Scottish vote for independence were pretty over the top.

We were warned of a run on the banks, a collapse of the pound, generalised financial chaos, an implosion of the Scottish economy, an exodus of businesses from north of the border, spiking inflation. The only thing missing from the predictions of doom was a plague of locusts.

But now that a majority of Scots have decided they would not break up our 307 year-old political union, what does that mean for the UK economy? What are the implications for GDP growth and living standards?

The answer is: not a huge amount. Aggregate levels of investment by UK businesses are unlikely to dip, as they might have done if the Scots had voted “yes” and set in train a long political haggle over the financial and economic details of the national divorce settlement. Rising business spending should help support GDP growth and rebalance the recovery away from consumer spending. Many predicted, probably accurately, that if the Scots had voted yes the Bank of England would have kept interest rates well into next year. Now the Bank can set rates based on its judgement about the inflationary pressures in the UK economy. However, most members of the Bank’s Monetary Policy Committee did not seem to be in any great hurry to put up the cost of borrowing, notwithstanding the Scottish issue.


Some downside risk to the UK’s recovery has been removed today. Panicky traders in the financial markets have less reason to sell UK shares. A distraction for executives, particularly ones based in Scotland, has been removed. Yet it’s hard to see why there should be any tangible post-referendum economic bounce. The immediate downsides of divorce were exaggerated. The near-term benefits of staying together will likely be rather mild too.