Independent Scotland Would Begin With 6.4% Deficit

An independent Scotland would start out with a budget deficit of at least 6.4 percent in the event of a vote to break away from the U.K. in a nearing ballot, according to the Centre for Economics and Business Research.

An analysis of new data from 2013-14 showed that the potential shortfall for 2016-17 is higher than its previous estimate of 5.8 percent of gross domestic product, the London-based group said today in a statement. The projection also exceeds a separate estimate of 5.5 percent for the same year by the Institute for Fiscal Studies in June, it said.

“The probability is that the fiscal pressures on the new government of an independent Scotland would be substantial,” the CEBR said.

Voters in Scotland will go to the polls on Sept. 18 to decide whether to stay within the U.K. or become independent. The referendum is dominating Britain after door-to-door campaigning intensified last week and Scotland’s nationalists overtook opponents of independence in an opinion survey for the first time this year.

The new data for 2013-14 showed that Scotland had a 9.9 percent total deficit as a percentage of GDP, compared to a U.K. budget gap of 5.7 percent, the CEBR said. Austerity measures already in place and “some” gain in oil revenues should reduce the Scottish figure to 6.4 percent in 2016-17, the first full year in which Scotland might be independent, it said.

While the calculations assume Scotland can sustain its tax base, “it is clear that part of the financial service sector would have to leave” an independent country, the CEBR said. A post-independence government would also need to issue about 9 billion pounds ($14.7 billion) of new bonds at a “substantial” interest-rate premium, it said.

Standard Life Plc, the Edinburgh-based life insurer founded in 1825, has said it’s preparing to shift business elsewhere in case of a vote for independence.

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