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Weir Group report: iScotland could work, but would create business costs, uncertainties

Leaving the UK would create "a number of costs and uncertainties" for business with "fewer, more uncertain benefits", a report has concluded.

The study, commissioned by one of Scotland's largest companies, says the country's economy "could succeed" if there is a Yes vote in September's independence referendum.

But it goes on to warn: "The end of the Union would create a number of costs and uncertainties, and fewer, more uncertain benefits, for those businesses so vital to Scotland's future prosperity, as it goes its own way."

The report, by Oxford Economics, was commissioned by the Weir Group engineering firm, which employs 600 staff in Scotland and 15,000 people globally.

It has been published in response to the Scottish Government's white paper on independence, and seeks to address the issue of what leaving the UK would mean for firms north of the border.

The report argues a "key benefit" of independence would be the "policy flexibilities that it would bring".

It says: "Independence would clearly bring control over policy making closer to the people of Scotland. It would allow a Scottish government to tailor an expanded range of economic policy levers to the needs and circumstances of the Scottish economy, as well as the distinctive views and values of the Scottish people."

But it adds there could be "risks and costs to businesses in adapting to the changes implied by independence, as well as costs that flow from the inevitable uncertainty during the transition phase that would follow a Yes vote".

The report describes the Scottish Government's estimate of the 27,000 jobs that could be created by cutting corporation tax as being "probably over-optimistic".

It goes on to warn that "fiscal realities will likely constrain the policy choices of an independent Scotland", arguing that "an independent Scotland is likely to need to tax Scottish business overall more heavily than if it remained in the UK".

Whatever currency arrangements are established, it fears Scottish companies are "likely to face higher funding costs post-independence".

Meanwhile if an independent Scotland cannot reach a deal to keep the pound in a currency union - something the main UK parties have already rejected - it says businesses will face additional costs if the country is forced to adopt its own currency after independence.

Changing currency could mean "substantial one-off costs for business, amounting to around £800 million", according to the report, along with "ongoing transaction costs on Scottish businesses and households of around £500 million per year".

In addition it says independence would add "new complexities to businesses in providing pensions for their employees".

Ivan McKee, a director with pro-independence group Business for Scotland, said: "As the report says it will be in the interests of the rest of the UK as well as an independent Scotland that all parties work together.

"As Business for Scotland has been saying for some time now there will be a sterling area given the level of trade between the countries. Indeed the report talks about the implications of transaction costs if a currency union weren't to be agreed.

"This would mean English businesses incurring £500 million of transaction costs annually. It simply doesn't add up."

Mr McKee, who owns an engineering firm, continued: "I am in no doubt that an independent Scotland will be positive for the economy and the wider community. It is the business opportunity of a lifetime."

Chief Secretary to the Treasury Danny Alexander said: "Weir Group and Oxford Economics join the long list of businesses and academics that have said independence will cost Scottish people money and jobs. As part of the UK, we are building a stronger economy for Scotland - let's keep it that way."

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