Until last week, almost nobody outside Scotland took very seriously the possibility that Europe’s most stable and durable nation, the only big country on earth not to have suffered invasion, revolution or civil war at any time in the past 300 years, might soon be wiped off the map.

It now seems quite conceivable that the United Kingdom of Great Britain and Northern Ireland will cease to exist after the referendum on Scottish independence to be held Sept. 18.

The prospects for Scotland and Britain changed abruptly on Sept. 2, when YouGov, one of Britain’s most authoritative polling organizations, published a survey showing the unionist lead narrowing to just 53-47, compared with typical margins of 10 to 20 percentage points in previous polls.

So sudden and large was the shift in the numbers that Peter Kellner, the president of YouGov, could hardly believe his own numbers. As he said on his weekly blog: “Alex Salmond [the Scottish Nationalist leader] seemed to be heading for a heavy defeat. But now a close finish looks likely, and a ‘yes’ victory is a real possibility.

“When I first saw our data, I wanted to make sure the movement was real. All polls, however carefully conducted, are subject to sampling error. Can we be sure this rise in support for independence is real? I am now certain it is.”

By tracking how individual voters had changed their minds on the referendum, Kellner concluded that the independence campaign were gaining four voters for every one they were losing, while the unionists were losing two supporters for every one gained.

Analyzing the data by party affiliations yielded the same conclusion: the shift in opinion was for real. Beyond the statistical cross-checking, there are several reasons to believe that a breakup of the U.K. has become a genuine possibility.

For a start, the shift in public opinion had a clear catalyst: a televised debate the week before last that was clearly won by Salmond. More fundamentally, the assumption that the Scots would be mainly swayed by economic issues, which favor risk-averse voting for the status quo, has turned proved wrong.

It now appears that many voters are focusing mostly on the political implications of independence.

Many Scots see the referendum as an opportunity to turn their country into a Scandinavian-style social democracy, expressing a collectivist national spirit that has been suppressed by English conservatism, especially since Margaret Thatcher’s election in 1979.

The fact that Scotland did not elect a single Conservative member of Parliament (MP) in the last U.K. election provides clear evidence of this ideological divergence.

Whatever the reasons for the independence upsurge, financial markets have suddenly taken notice. Last Tuesday’s YouGov poll triggered an immediate selloff in sterling, the biggest jump in the expected currency volatility implied by option premiums since the 2011 euro crisis, and big falls in the shares of Royal Bank of Scotland. The panicky reaction made sense.

Even if the chances of Scottish independence remain quite low — the odds are only 20 percent according to political betting markets — the consequences of this low probability event would be immense.

The Scottish referendum could trigger all kinds of other risks that financial markets and international business leaders have not yet fully understood.

Most financial and business analysis has understandably focused on economic issues such as currency arrangements, government guarantees for financial institutions and North Sea oil revenues. Troubling as these are, the political consequences of independence would be even more disruptive.

The problems would begin immediately after the referendum, since a vote for independence victory would probably trigger a rebellion against David Cameron by right-wing members of his own party, whose historic name is the “Conservative and Unionist Party.”

Another reason to expect mutiny is ironically that Conservatives would win elections in England easily in the future, after Scotland’s Labour members of Parliament are permanently gone from Westminster. This confidence would, in turn, allow party activists to opt for a leader more in line with their own euro-skeptical and right-wing views than the moderate Cameron.

Whether or not Cameron could survive defeat in the referendum, a huge constitutional challenge would loom in May 2015, when a general election must be held in the U.K. as a whole. Scottish independence would shatter the democratic legitimacy of whatever government emerged from this election.

If Labour won a majority, its victory would depend on Scottish MPs due to be expelled from Westminster at the end of the independence negotiations in 2016 or 2017. A Labour-led government elected next year would therefore have no democratic mandate.

If, on the other hand, the Tories manage to win next year’s election, even after a Scottish independence vote this month, they will become extremely confident of securing an even larger majority after Scotland is gone.

If Cameron is then replaced with a much more EU-skeptical prime minister who would campaign for Britain to leave the EU, a British electorate without pro-European Scottish voters would almost certainly endorse this decision in a referendum.

Finally we need to consider the impact of Scotland voting to stay in the union, but only by a narrow margin. If the vote turns out to be as close as suggested by the latest polls, then the nationalists are unlikely to accept the outcome as final.

Cameron’s authority as prime minister and Conservative leader would still be seriously diminished and the outcome of next year’s general election, already “too close to call,” would swing in favor of Labour. Even if the Tories did stay in power, the outcome of the EU referendum in 2017 would become increasingly uncertain.

In sum, political instability looks like becoming a permanent fact of life in Britain unless the unionists can win the Scottish referendum by a decisive margin. Since such a clean-cut outcome now looks unlikely, the volatility last week in sterling and other British assets is probably a portent of things to come.

Anatole Kaletsky is an award-winning journalist and financial economist. The opinions expressed here are those of the author.

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