UK recovery takes hold but AXA IM warns of independence impact

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The pace of UK growth picked up again over the summer months, according to latest estimates, but AXA IM has suggested the recovery may be shortlived if Scotland votes for independence in September.

Output grew by 0.6% in the three months to the end of August, compared to 0.5% over the three months to July 2014, according to the National Institute of Economic and Social Research. However, growth remained below a first quarter high of 1%.

In total, the think-tank estimates annualised UK GDP of 2.9% so far this year. The figure is close to NIESR's initial forecast of 3% GDP growth for 2014.

Despite the strong outlook, others have warned growth forecasts may be negatively affected by a Yes vote for Scottish independence.

In this scenario, UK growth for 2014 would be 0.25 percentage points lower, according to AXA IM senior economist David Page, dragging GDP growth for 2014 down to below 3%. In 2015 it would be 0.75 points lower, with annual GDP growth of below 2%.

He said: "Financial markets would also see a marked reaction. We expect sterling to fall further on Scottish independence, as recent declines suggest."

The aftermath of a Yes vote would be marked by a fall in investment growth, which could in turn trigger the Bank of England to introduce more monetary easing, he suggested. 

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