Even if the UK can secure a free trade agreement with Europe after a vote to leave later this year, economic growth would be 3 per cent lower than the country’s expected output within the EU by 2020, reports The Telegraph.
The CBI, which has voiced strong support for EU membership, has used the data from PwC to repeat its warning that businesses will be left vulnerable to trade obstacles and a shaky economy outside of the bloc.
“The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment. Even in the best case this would cause a serious shock to the UK economy,” said Carolyn Fairbairn, director general of the CBI.
If the UK could sign a trade agreement with the EU and other trading partners within five years of the referendum on June 23, PwC estimates that the economy would be 3 per cent smaller than it would have been within the EU by 2020, amounting to £55bn wiped from the country’s output.
This decline would come from lower international trade, a fall in net migration and uncertainty, leaving businesses reluctant to spend. However, the effects would fade over time and by 2030 the country’s GDP per head would be 0.8 per cent behind the pace of growth expected within the EU.
Without a trade agreement, the UK could be hit with tariffs under a standard World Trade Organisation deal and output growth could grind to a halt in 2017 and 2018, leaving GDP 5 per cent lower by the end of the decade, PwC estimates. This amounts to a £100bn short-term shortfall compared to staying within the Union.
“On the impact for business – it is hard to see circumstances under which the UK could secure a better set of deals on trade and investment outside the EU. Leaving the EU would hit some of the UK’s top sectors hardest. And current global uncertainty means that now could be one of the worst times to leave,” said Ms Fairbairn.
There would also be a short-term uptick in unemployment from the current rate of 5 per cent to about 8 per cent, although the labour market would adjust to the new landscape and the expected fall in net migration, the research suggested.
The longer-term outlook is brighter. PwC estimates that average income per capita would still rise considerably by 2030, increasing by up to 39 per cent on current levels compared to a 41 per cent rise if we remain in the EU, once the immediate uncertainty fades.
The data comes a week after the CBI published a poll of its membersshowing that 80 per cent believed being part of the 28-nation bloc boosted their own businesses, while 77 per cen said continued membership would benefit the UK economy. However, the organisation has said it will not register as a campaigner for either side of the referendum debate.
Matthew Elliott, chief executive of Vote Leave, said the selection of scenarios in the research was too pessimistic.
“Even in the CBI’s skewed choice of scenarios for exit, they are forced to admit that employment and the economy will continue to grow after we Vote Leave. The EU funded CBI are desperate to recreate the same scare stories they spread when they urged Britain to scrap the pound and join the euro. They were wrong then and they are wrong now,” he said.