The costs of regime change in Scotland

So far financial markets remain markedly indifferent to the potential threats posed by Scottish independence. But with only two months left before voters in Scotland make a decision, more and more minds are focusing on the issues involved.

Investment bank UBS this week published a report on the financial impact of a yes' or no' vote. Bill O'Neill of UBS told This is Money that a no' vote would probably be followed by a modest, positive reaction for the pound, shares and gilts.

But if Scotland votes for independence, "we can expect significant market volatility given the enormous uncertainties around subsequent political negotiations". The pound would be hit by erosion of business confidence and the threat of higher cross-border transaction costs.

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Meanwhile, Morgan Stanley economists argued that "a yes' vote is much more than just a tail risk", which would "leave the rest of the UK more exposed to financial risks", reports The Daily Telegraph. UK government bonds would suffer as a resultof uncertainty produced by "regime change", particularly if thetwo countries couldn't reach an agreement on how to share thenational debt out.

The economics of independence matter a great deal, notesThe Economist. Nationalists have tried to claim that Scotswould each be £1,000 better off after independence. But the UKgovernment estimates that, in fact, staying in the UK is worth£1,400 a year to everyone living in Scotland, a figure based on"more realistic assumptions".

Still, the referendum isn't justabout money. There's also a deep distaste for the Conservativeparty among Scots "nationalist protesters recently donnedpanda outfits to remind David Cameron that there are morepandas in Edinburgh zoo (two) than there are Tory MPs inScotland (one)".

And if the UK wants to survive in the long term,it needs to reflect these differences better. "As a politicalexpression of liberal values and attitudes, it would be morecredible if it were not so centralised."