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CBI chief says sterling union is unworkable

The president of the CBI will today insist his organisation will not shy away from the independence debate as he raises the spectre of a Czechoslovakian-style currency meltdown after a Yes vote.

SIR MIKE RAKE: Says he will continue to ask difficult questions.
SIR MIKE RAKE: Says he will continue to ask difficult questions.

Last month the business leaders' group was embroiled in a damaging row in Scotland over its decision to formally register as a No supporter in September's referendum.

Within days a number of high-profile organisations had resigned their membership in protest.

Last night pro-independence campaigners said that the organisation's reputation in Scotland had been "permanently damaged" by the fallout from the row.

But in a speech to executives and senior politicians tonight the body's president Sir Mike Rake will say that the CBI will continue to ask difficult questions about independence "without fear or favour".

He will also defend the benefits of the UK, saying that it has "the scale and resilience to deal with economic headwinds and fluctuations in world markets".

On the issue of the SNP's proposed currency union between an independent Scotland and the remaining UK, he will point to the what happened in Czechoslovakia after the country split in 1993.

At the time both sides agreed to continue using the same currency, as part of a formal currency union.

But the deal collapsed within weeks as fears led to large amounts of money being moved out of Slovakia and into the Czech Republic, so-called capital flight.

Tonight Sir Mike will say: "On the crucial issue of the pound, it's clear that, even if it had been accepted (which it has not), a sterling union would lack many of the conditions that are required for a stable currency to function."

He will warn: "We have shared the pound for 307 years. It took just 33 days for Czechoslovakian monetary union to collapse following the separation into the Czech Republic and Slovakia in 1993.

"The precise details are, of course, different, but the moral of the story remains the same."

Last night Vince Cable, the Liberal Democrat Business Secretary, supported the CBI stance. "It's right to highlight that leaving the UK could present sizeable risks to Scottish businesses," he said.

Labour MP and shadow business minister Ian Murray also appeared to support the organisations, saying that Scottish businesses had access to a market of more than 60 million people across the whole of the UK. He added: "Why would we want to put up barriers between Scottish firms and their customers elsewhere in the UK?

"If we leave the UK it would create uncertainty for Scottish firms and cost jobs here."

In a statement the pro-independence campaign group Business for Scotland said that the CBI's reputation had been "permanently damaged by its No campaign which has led to the withdrawal of membership by more than 20 Scottish organisations."

Among those who resigned from the CBI following the independence row include a number of universities, two Scottish Government agencies, Scottish Enterprise and VisitScotland, as well as the broadcaster STV, the Balhousie Care Group and energy company Aquamarine Power.

After days of pressure, and in a surprise move, the CBI announced that following legal advice its application to register as a No supporter had not been completed by an authorised signatory. The elections watchdog, the Electoral Commission, announced the application had been declared void.

The CBI director general John Cridland said it had made an "honest mistake" in registering.

But the move has done little to take the heat of the ensuing row.

Registration with the Electoral Commission is necessary for those planning to spend more than £10,000 on campaigns during the referendum period. The move allows access to the electoral register and for representatives to attend polling stations and counts.

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