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CBI: Separation is the most important political risk firms face

THE Confederation of British Industry (CBI) has made a fresh appeal for Scotland to remain part of the UK, warning that the uncertainty surrounding independence is "the most important political risk" companies currently face.

The business group, which has repeatedly argued against an independent Scotland, said its latest forecast of three per cent economic growth in the UK during this year depends on a continued union with England.

Director general John Cridland told reporters yesterday that the CBI was unable to predict the exact economic effects of an independent Scotland as there were too many unanswered questions.

"We can't be clear what the implications of a break-up will be," he said.

"I think it's the most important political risk that the CBI and businesses are facing."

"Overwhelmingly, British ­businesses believe the UK should stay together ... the Scottish voters are faced by a lot of economic uncertainty if they vote for Scottish independence."

He pointed out that Scotland "probably will not be able to ­negotiate all the flexibility that the UK has" within the European Union. "(Scotland) is not in the Eurozone, it's not in Schengen... and that's part of the UK's membership," he said.

His comments came as the CBI maintained its economic growth forecasts for 2014, predicting that a surge in business investment will outweigh the uncertainty stirred up by political crises in the Middle East and in Ukraine.

The business group expects growth to slow to 2.7 per cent in 2015 as the UK economy lags behind those of its fellow G7 members in edging back to its pre-crash peak.

The CBI also noted the strength of the pound sterling, combined with stagnation across large parts of the Eurozone, were both exacerbating weak growth in exports for British companies.

Exports are predicted to grow by 3.9 per cent next year and imports by 3.5 per cent.

The pound dropped to a seven-month low against the dollar on Tuesday, which analysts said was due to investors trying to price in the recent rise in support for Scottish independence.

Private sector businesses nevertheless reported growing confidence during August, with 38 per cent expecting to grow in the next three months. This level is slightly below the 11-year high of 42 per cent set in April.

"There are a few early signs that momentum in the economy may ease slightly in the second half of the year," said Rain Newton-Smith, who is the CBI's director of economics.

"However, growth is set to remain robust, and there are positive signs that the recovery is continuing along the right track."

House prices are rising faster than the CBI expected, prompting the group to raise its forecast for the year to 9.5 per cent. However, its economists believe price inflation will start to lose some steam and rise by five per cent in 2015.

The group thinks that the UK will be waiting until early next year before a substantial rise in wages or a hike in the Bank of England's interest rate.

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