Economist: EU vote would be drag on growth

 
Chris Papadopoullos
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AN IN-OUT referendum on Britain’s EU membership would hinder growth regardless of the outcome, a City economist has warned.

Given the vote would likely not be until 2017, businesses and households would be plagued by two years of uncertainty, says economist James Knightley from banking giant ING.

“Foreign investors may not be prepared to wait for clarity on the UK-EU situation with UK asset prices and sterling coming under pressure, as was the case in the run-up to the Scottish independence referendum,” Knightley said. But should the UK negotiate a stronger deal with the EU and vote to stay, growth could rebound substantially in 2018 – the year after a referendum – to 3.5 per cent as delayed investment projects are undertaken.

A vote to leave would likely push growth below 1.5 per cent in 2018.

Knightley is hopeful a better deal can be struck on UK membership.

“With many EU countries preferring to keep the UK as a member, we feel that there is scope for concessions to be won. Moreover, if Ukip does well at the upcoming General Election, it may highlight to other European leaders how much of an issue it is to the UK electorate.”