Independent Scotland would lose UK's AAA rating, warns Citigroup

The economic viability of an independent Scotland has been questioned by one of the world’s biggest banks — joining the growing number of businesses voicing concerns over the prospect of Edinburgh breaking away from the UK.

Analysts at Citigroup, America’s third-largest lender, have said that if Scotland was deprived of a formal currency union, it would qualify for only a single-A credit rating — two notches lower than the “gold-plated” grade given to the UK by S&P. Other countries with a single-A rating include Botswana and Trinidad & Tobago.

A lower credit rating could lead to Scotland paying more to finance its debts, and make it harder for Edinburgh to attract international capital.

“Overall, we believe an independent Scotland would have a relatively weak and risky fiscal position,” the bank said in a research note to investors on Friday. “This might well produce a sizeable borrowing premium.”

The effect of Scottish independence would be only “a modest negative” for England, Citi said.

“The direct effects of Scottish independence would probably be to marginally cut the fiscal deficit of the rest of the UK, since Scotland’s fiscal deficit slightly exceeds the UK level,” said Citi’s team of analysts in the 20-page report.

Although Citi’s view is that it is highly unlikely that Scotland will vote to split from the UK, the bank warned that “the possibility of Scottish independence has generated political uncertainty within the UK, and confusion abroad”.