Becoming a member of the EU has been a vital part of ensuring Britain’s strong economy as Britain’s GDP per capita has doubled since joining the EU in 1973. Leaving the EU is a risky option for Britain, as its projected consequences will negatively impact the strength of the country’s economy. Whilst exact cost predictions are highly dependent on the assumption of each economic model, a range of studies have concluded that leaving the EU would have negative implications on the British economy.
Projections have suggested that the overall consequences of Brexit on the British economy would be similar to a tax, imposing a persistent and rising cost on the economy over time. The OECD’s modelling has suggested that by 2020, the financial shock of Brexit could decrease British GDP by over 3 per cent, with costs equivalent to £2,200 per household. Whilst there would be an early saving through the cancellation of transfers to the EU budget which would amount to around 0.3-0.4 per cent of British GDP per year, this would quickly be offset by the long term effects of GDP being 5 per cent smaller by 2030. With an optimistic model, this would cost around £3200 per household and in a more pessimistic model this would be up to £5000.
Britain outside of the EU would cease to have preferential access to the 53 non-EU markets and the process of Britain negotiating similar preferential trade agreements would be slow and costly. Britain would miss out on the EU’s ongoing trade negotiations with the rest of the world and benefits of trade with some countries that the UK is unlikely to pursue alone.
Considering the economic benefits of the British-EU trade relationship, it is clear that the single market membership outweighs the bureaucratic EU regulations. The single market and the EU’s global trade agreements are important economic policies for the British government to retain.
Regardless of the basis of different economic models, the resounding conclusion is that Britain’s GDP will decrease once leaving the EU, resulting in British households losing thousands of pounds worth of economic gains. The British economy will be severely impaired by losing access to the EU’s single market and trade deals, and any attempts to renegotiate preferential trade agreements will be time consuming and costly. A decision to stay will ensure Britain’s continued success and prosperity; but a decision to leave will undo decades of economic, geostrategic and migration policies that have demonstrated clear and significant benefits to Britain.
Stephen Koukoulas is one of Australia’s leading economic visionaries, past Chief Economist of Citibank and Senior Economic Advisor to the Prime Minister. To see Stephen’s profile and speaking topics click HERE.
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