Leaving the European Union could decrease the UK’s economic output by £100,000, leading to massive job losses, a study by the Confederation of British Industry (CBI) has warned.
Up to a million British workers could lose their jobs in case of an ‘out’ decision in the June referendum on EU membership, a study commissioned by the CBI found, warning that the economic slowdown could last for years.
The study was carried out by professional services firm PwC and examined two possible scenarios of Brexit’s impact on trade and investment - one more optimistic, one pessimistic. Both scenarios found that living standards, GDP and employment would be significantly impaired by an ‘out’ decision compared to staying in the bloc.
"The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment,” said Carolyn Fairbairn, director general of the CBI. “Even in the best case this would cause a serious shock to the UK economy. By 2020, the overall cost to the economy could be as much as £100bn and 950,000 jobs. Household income in 2020 could be up to £3,700 lower than it would otherwise have been.”
She added that even though the economy would eventually recover, it would never manage to catch up with what it would have been if the UK stayed in the EU. As a result, the 2030 economy would be much smaller than the prediction for the UK as a part of the EU.
Even if a free trade agreement with the EU is put in place, GDP would suffer. By 2020, it could be by up to 3 to 5 per cent less. GDP per household in 2020 could be between £2,100 and £3,700 lower, and the UK's unemployment rate between 2 per cent and 3 per cent higher than if the UK had remained in the EU. The economic growth could grind to a halt by 2017 or 2018 and only slowly pick up momentum again.
"The three big impacts of leaving the EU we have been able to identify are increased uncertainty, a negative shock to trade and investment, and reduced labour supply through migration,” said Andrew Sentance, senior economic adviser at PwC. “While the potential to reduce the burden of regulation and lower fiscal contributions to the EU could be offsets, the net impact of the UK leaving the EU is still likely to be negative for GDP, employment and living standards, both in the short-term and the long-term."
Ms Fairbairn added that if the UK leaves the EU without a free trade deal, 90 per cent of British exports to the EU could face tariffs, with sectors such as textiles and transport equipment hit particularly hard.
"The findings from PwC's independent study also explain why the majority of UK businesses are in favour of remaining within the European Union,” she said.
Last week, CBI published results of a study conducted among its member companies, which found that four out of five believe the UK’s staying in the EU would be better for their business.