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Tuesday 23 September 2014

Independent Scotland poses major threat to our economy

Sam Griffin

Published 25/08/2014 | 02:30

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Scotland's referendum will be held on 18 September
Scotland's referendum will be held on 18 September

ECONOMISTS have warned there could be a significant 'medium to long-term' impact on the Irish economy if the Scottish referendum on independence is passed next month.

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Scots go to the polls on September 18 but uncertainties persist over what shape an independent Scotland would take, including what currency the new state would use and whether it will apply to join the European Union - issues which leading economists say Ireland should pay careful attention to.

Pro-independence First Minister Alex Salmond and Alistair Darling, leader of the 'no' campaign, will face off in their last televised debate on BBC tonight.

The 'no' campaign, which claims to have the support of the silent majority, has brought together a wide range of unionists from Labour and Conservative party members to socialists and members of the right-wing UK Independence Party.

Opinion polls suggest voters are narrowly divided on whether to break up Scotland's 307-year-old union with England. In opinion polls the anti-independence side has maintained a consistent lead - but as many as a million undecided voters hold the balance.

Voter turnout in the referendum is expected to be high, possibly topping 80pc.

Enterprise Ireland said its client companies had direct exports of goods and services worth over €270m to Scotland last year.

However, Stephen Kinsella, of the University of Limerick, said the true value of Irish trade with Scotland was likely to be much higher.

"That figure probably stems from how much business Ireland exports to Scotland alone," he said.

Prof Kinsella said that the extent of the impact on our economy would depend on a number of factors following the referendum, including whether or not the new country undergoes a period of austerity as it adjusts to its new economic realities.

"That could have a big impact on Scotland buying our goods. Decoupling from a massive economy, just as we did, causes problems of adjustment. So the wages will shoot up artificially or the structure of the economy will change, or they get themselves into a lot of debt. All these outcomes could result in austerity. That will hammer the Irish economy," he said.

David Bell, from Stirling University, said it was likely Scotland would cut its corporate tax rate, something which would have potential ramifications for Ireland.

"The UK is committed to keeping its corporation tax at around 20pc while Ireland is at 12pc. It's likely Scotland would want to end up somewhere in between. I wouldn't be convinced Ireland would lose its advantage in the short-term but foreign direct investment is about more than corporation tax," he said.

"It's about skills and infrastructure and other things which make a business tick. There's not much between the two in terms of infrastructure but Scotland probably has better universities at the top end, so we would have to see over the long-term what the impact would be on Ireland."

Irish Independent

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