British pound falls over Scotland independence referendum fears

The British pound has fallen to a 10-month low against the dollar amid a selloff of Scotland-linked companies, after a weekend poll showed a potential surge for independence.

The markets reacted with widespread negative sentiment over rising uncertainty about the United Kingdom's economic stability.

The pound was trading down more than 1 percent against the U.S. dollar in midday trades. At 3 p.m. in the UK trading day it was still 0.99 percent down.

A broad range of companies with major interests in Scotland also saw their share prices fall on Monday.

Weir Group saw its shares drop more than 2.45 percent, SSE fell 2.44 percent and defense contractors Babcock and BAE Systems slid 4.87 percent and 2.37 percent, respectively.

The Royal Bank of Scotland dropped 2.88 percent, Lloyds Banking Group was down 3.36 percent and Standard Life fell 4.2 percent.

The drops eased slightly in afternoon trades.

Many leading pension funds have significant exposure to the banks and big companies affected by the selloff. research director Kathleen Brooks told Sky News: "An independent Scotland would potentially have to start a currency from scratch, which is a hard thing to do.

"Obviously a new currency was formed with the euro, but that was decades in the making -- and Scotland doesn't have the time so it would be a real uphill struggle."

The selloff follows a YouGov poll in the Sunday Times which indicated that 51 percent of Scots supported independence while 49 percent backed the current Union.

It was the first time polls suggested there could be a 'Yes' vote for independence in the referendum on September 18.

On Sunday, Chancellor George Osborne sought to head off the surge of support for an independent Scotland by promising more powers north of the border, including control over taxation, job creation and welfare spending.

"The markets took for granted for so long that it was going to be a 'No' vote and as the polls narrow there has been a huge change in sentiment," Brooks added.

"If there is a 'Yes' vote in 10 days' time, things are going to get very ugly in the markets, not just for the pound, but for stocks and potentially raise our borrowing costs in the UK without Scotland."

And on Monday, party leaders began a final push to sway undecided voters as Alistair Darling, leader of the Better Together campaign, warned a Yes vote "would be forever."

The Scottish government, based on expert advice it has received, has said that Scotland should continue to use the pound as part of a currency union with the rest of the UK.

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