Business Secretary Vince Cable and Scotland Office Minister David Mundell told the Commons Scottish Affairs Committee that they are not predicting "Armageddon" if Scotland votes for independence.
Scottish businesses are not "panicky" about independence although there is "underlying uncertainty" about Scotland's future in the UK and also about the UK's future in the European Union, Mr Cable said.
"A degree of devolution of taxation" would be welcome but difficulties could arise if Scotland went "the whole hog", he said.
Scottish businesses benefit from common laws and regulations, as well as freedom of movement and trade, as part of the UK, according to Mr Cable.
Committee convener Ian Davidson, a Labour MP, questioned how freedom of movement and trade would be affected if both parts of the former UK remain in the EU, but the ministers said this has been the experience in other countries.
Mr Cable said: "I've heard about Project Fear and I try to put things in a dispassionate and unemotional way.
"When I'm in Scotland I meet business groups and individual companies, many of whom have foreign ownership. It does emerge that there is some uncertainty.
"To be honest no one is getting angry and panicky about it, but it is an underlying uncertainty that people do worry about it in much the same way that foreign investors in the UK worry about our future relationship with the EU."
Liberal Democrat MP Alan Reid suggested businesses on both sides of the border would lose tax revenue if Scotland undercuts the UK rate of corporation tax by exploiting cross-border disparities.
Mr Cable, a fellow Lib Dem MP, said: "In principle, having a degree of devolution of taxation is something that you and I believe in but I think if you go the whole hog by having a fully independent system with different tax regimes, you do open up those problems on a much bigger scale."
Some small countries like Finland are economically successful but others like Iceland are "a complete and utter disaster", according to Mr Cable.
"There is no reason why a well-run Scotland shouldn't do relatively well. The argument we make here is that there are additional advantages to being part of the UK and that there would be real costs in departing from the UK. But it would depend on future Scottish governments and how they behave."
Mr Davidson said: "I'm not entirely clear what the logic is for assuming that trade will be less between Scotland and the rest of the UK."
Mr Cable replied: "We're not forecasting Armageddon. We're dealing with one aspect of a much bigger argument about the merits of the Union. You have to look at the experience of different regions of a country, as opposed to different countries.
"Even if those countries are very friendly and get on well, Germany and Austria, Norway and Sweden, or Canada and the US, to see that once countries develop their own jurisdictions they start to diverge."
Mr Mundell said: "Armageddon hasn't been predicted in any of the papers, and the UK Government has never and will not say Scotland could not function as an independent country. Of course it could. The issue is whether it would be better."
Mr Davidson said: "If Scotland and the UK remain in the EU there will be no change in the pattern of free movement as a result of any decision on independence. Is this not another issue where there will be no difference as a result of separation?"
Mr Cable said: "You can't completely assume that. Supposing there was an independent Scottish Government that decided to have a different approach to immigration from the current UK Government, which it may well do because the demography of Scotland is different.
"If they decided to have a much freer approach to migration, which diverges from what the rest of the UK wanted, you would have to have border checks within the former UK in order to prevent the rest of the UK's immigration rules being undermined."
Mr Davidson said: "Leaving aside external migration, surely there would be no difference as a result of Scotland becoming separate on internal migration unless conscious decisions are taken by the UK or Scotland."
Mr Cable said: "If everything was left otherwise unchanged then there is no reason to assume that there would be any disruption in the UK."
Mr Mundell cited last year's Northern Ireland immigration figures which show that 1,566 people moved to the Republic and 11,121 moved to the rest of the UK.
Mr Davidson said: "Surely that is partly explained by the fact that London and the South East of England are economic nirvana compared to the Republic of Ireland. People are migrating where they think the jobs are, rather than because of being within the one nation state."
Mr Mundell replied: "There is a lot of evidence to suggest that people are more inclined and willing to make that move if it is within the one nation state."