21st March 2016
A Brexit could cost UK economy £100bn and 950,000 jobs by 2020, claims a new report commissioned by The Confederation of British Industry (CBI).
CBI director-general, Carolyn Fairbairn, warned that leaving the European Union would leave negative echoes that could last many years after that.
In an economics lecture at the London Business School, the CBI will analyse the potential impact of the UK leaving the EU – on trade, investment, jobs and growth.
To quantify the impact on the economy, the CBI commissioned professional services firm PwC to examine two different exit scenarios: one at the optimistic end of the range, and the other recognising the likelihood of difficult trade negotiations but nonetheless with trade deals being concluded.
Both scenarios use moderate assumptions according to the business lobby.
Under both PwC scenarios, UK living standards, GDP and employment are significantly reduced compared with staying. The analysis indicates a cost to the British economy of leaving of as much as £100bn – the equivalent of around 5% of GDP – by 2020.
Even in a scenario where a Free Trade Agreement with the EU is secured rapidly, the analysis indicates GDP could be 3% lower by 2020. GDP per household in 2020 could be between £2,100 and £3,700 lower, and the UK’s unemployment rate between 2 and 3 percentage points higher, than if the UK had remained in the EU. GDP growth in the years 2017-2020 could be seriously reduced – and possibly be as low as zero in 2017 or 2018.
The CBI believes that none of the alternatives on the table offer the same access to and influence over the EU single market as full EU membership.
Fairbairn said the analysis shows “very clearly” why leaving the European Union would be a real blow for living standards, jobs and growth.
She added: “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.
“The economy would slowly recover over time, but never quite tracks back to where it would have been. Leaving the EU would mean a smaller economy in 2030.
“Even under optimistic assumptions, an exit triggers serious economic disruption.”
This new analysis comes a week after the CBI reaffirmed its strong member mandate to make the economic case to remain in the EU following a thorough consultation process. In addition, it published an independent ComRes survey of CBI members – who employ one third of all private sector employees – which found that 80% believe being part of the EU is best for their business and 77% said it was better for the UK economy as a whole.