Britons are set to make a critical decision in June which will have an impact on the economic fate of both the UK and the EU should the decision be taken to leave. The debate so far has been one of claim and counterclaim with little economic projection to back up either contention that the UK would be better off remaining within the EU or going it alone. Given the magnitude of the decision, this is little short of criminal.
The Centre for Economic Performance (CEP), a “think-tank” based at the London School of Economics has estimated that UK households could be worse off by as much as £1700 a year worse off following a “Brexit”. The longer term might see this figure climb to £6400.
CEP believes that any savings that the UK might make from lower EU contributions would be more than offset by the resulting decline in trade. If the UK left the EU, but sought the trading benefits of being in EFTA, it would still need to pay dues to the EU. CEP started from the position that currently, the UK does about half of its trade with EU countries – currently benefiting from internal market which is virtually free of barriers to trade. The UK would miss out on the benefits stemming from further future market integration within the EU if it left. A Brexit would see higher tariffs on UK goods and costs associated with British suppliers needing to certify that their products were made in Britain and were compliant with EU norms.
The best deal a separated UK could get from the EU would be similar to Norway’s position as a member of EFTA which would remove most trade barriers. CEP estimates that such a deal would see UK income decline by 1.3% which works out at £850 per household. However, if just one of the 27 remaining EU states chose to veto such an arrangement, then the CEP claim that the costs would double and EU UK trade would then be governed by World Trade Organization rules.
The authors of the report conclude that in the longer term, UK productivity and trade would decline, leading to a fall of GDP by 6.3%, equating to £6400 per household. They point out that if the UK joined EFTA, it would be obliged to pay dues to the EU and accept EU regulation that it would no longer have a hand in drafting. Membership of EFTA also requires that a state accepts the idea of allowing citizens to live and work anywhere within the bloc. The ramifications of a Swiss referendum on capping EU migrants have yet to be seen as the binding decision is yet to be enacted, but Swiss participation in EU student exchange schemes has already been cancelled.
Constructively, Vote Leave’s chief executive Matthew Elliott noted:
"These ridiculous claims lack credibility as they come from the same economic sages who said we would be better off scrapping the pound. Its principal claims are based on leaving the EU 'reducing trade'. Even pro-EU campaigners admit that the UK would have little difficulty striking a free trade agreement with the EU following withdrawal."
It is inconceivable that trade agreements would be quickly and seamlessly agreed between the EU and the UK in the event of a Brexit if for no other reason than the UK would have dealt a body blow to the concept of European unity which could fracture the EU itself. It must be remembered that Spain made it clear that a newly independent Scotland would not get automatic of fast-track membership of the EU due to its own concerns over Catalan independence demands. Is it credible that internal politics in 27 states would all align to let the UK enjoy trading terms as favourable (or more favourable) than it enjoys currently whilst no longer making the same budgetary contribution to the bloc? I think not.