Bank of England Governor Mark Carney warned that a currency union between England and an independent Scotland would be “incompatible with sovereignty”.

Bank of England

An independent Scotland keeping the pound has become a key point of contention in debates about breaking the union.

Bank of England Governor: Scots will vote on Sept 18th

The people of Scotland will soon decide whether Scotland should be an independent nation or remain a part of the United Kingdom. Though it’s theoretically possible for the new country to continue with the Sterling currency in the event of Scottish independence, some analysts including Barclays believe it’s more probable that an independent Scotland ends up with its own currency.

The leaders of the Scottish independence campaign originally planned to continue to use the British pound sterling if they won the vote, but all three major U.K. political parties have stated that they would not allow this.

Bank of England Governor told the TUC Congress in Liverpool on Tuesday that all three main parties in Westminster had ruled out currency union between an independent Scotland and the rest of the UK. Earlier this summer, Chancellor George Osborne, said that an independent Scotland could not keep the pound.

The Sterling currency has been falling in recent days as opinion polls have shown the Scottish independence vote is increasingly neck and neck as traders’ bet that a “yes” vote could push back the interest rate increase timetable.

Could create disruption to economy

Exuding confidence, Mark Carney indicated that the Bank of England anticipates real wage growth “to resume around the middle of next year and then to accelerate as the unemployment rate continues to fall”. He added: “Our latest forecasts show that, if interest rates were to follow the path expected by markets – that is, beginning to increase by the spring and thereafter rising very gradually – inflation would settle at around 2 per cent by the end of the forecast and a further 1.2m jobs would have been created,” he said. “In other words, we would achieve our mandate.”

In his speech at this year’s TUC Congress, the Bank of England Governor reiterated that a “currency union needs fiscal flows and a lender of last resort” – all of which Scotland would give up if it breaks the 307-year old union with England. He warned voters that even if an independent Scotland keeps the pound after the referendum, without the support of a political union, it could create severe disruption to the country’s economy.