As the Scottish referendum looms, would a Yes vote derail Britain’s economic recovery?
Howard Archer, chief European and UK economist at IHS Global Insight, says Yes.
A Yes vote would be unlikely to completely derail the UK recovery, given that it now looks pretty well established, but it could put a serious dent in growth prospects.
The uncertainty (over what will happen with the currency and UK debt in particular) would likely weigh down on business confidence and lead to a reining in of investment and employment plans, at least in the near term.
This will be especially likely if there is also accompanying sustained financial market volatility and a substantial hit to the equity market.
Consumer confidence could also be dealt a blow, leading to increased caution in personal expenditure.
There is also the risk that gilt yields could rise markedly, due to foreign investors being wary about what will happen with UK debt.
This could, however, be countered by the Bank of England if it delayed an interest rate hike, or even decided to resume quantitative easing.
Paras Anand, head of European equities at Fidelity Worldwide Investment, says No.
The uncertainty from the referendum will almost certainly hold back the hawks within the Bank of England, so the risks to a fragile recovery represented by a sharp rise in rates will abate.
It’s also worth remembering that the corporate sector is broadly based, with almost two thirds of earnings outside the UK.
Many companies have been growing uncomfortable about the level of sterling, worrying about the potential to remain competitive. In that light, a weaker sterling will be a welcome evolution.
An environment of heightened political uncertainty is a given, and while this could limit any potentially meaningful policy initiatives which could spur the economy, we’re entering a phase where businesses will grow as a percentage of economic output relative to the government sector.
The rate of growth may disappoint some, but over time, it’s the quality of earnings that counts.