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FOREIGN EXCHANGE

Scotland’s ‘sterlingization’ problem

Many observers remain unconvinced about the Scottish government’s official currency if the country were ever to gain independence.

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More than 20 years ago, Alex Salmond – then leader of the Scottish National Party (SNP) and later Scotland’s first minister from 2007 to 2014 – described the pound as a “millstone round Scotland's neck”. Despite this, in the lead-up to the 2014 referendum on Scotland’s independence from the United Kingdom, he seemed confident that Scotland could remain part of the currency union if the 'yes' vote won.

Current Scottish government currency policy is based on a 2018 report by the Sustainable Growth Commission, which suggested keeping the pound (a process known as ‘sterlingization’) for around a decade after independence.

And despite the passing of a resolution at the November 2021 party conference of the SNP – which remained by far the largest party in government after a May 2021 general election, despite not gaining an absolute majority – calling for the issuing of a Scottish currency as soon as possible after a yes vote in any future second referendum, the strategy of retaining the pound for a longer period has some support.

Professor John Kay, emeritus research fellow at St Johns College, Oxford, describes continued use of sterling as Scotland’s unit of account as a prudent and feasible approach.


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