This week, the CBI warned that leaving the EU would cause a serious shock to the UK economy. That’s after an independent PwC study found that, by 2020, the cost of Brexit to UK GDP could be as much as £100bn with nearly 1m jobs lost. That would prove a real blow to living standards – household incomes across the UK could be up to £3,700 lower than were we to stay in.
Writing in City A.M. yesterday, Leave.eu unsurprisingly dismissed this – despite the economic case stacking up against Brexit. They have also consistently failed to come up with a credible alternative to full EU membership.
Over the last week alone, there have been two further studies – from Oxford Economics and the London School of Economics – which show that a vote to leave is a vote for a less prosperous UK. While the business and economic case is only one part of the story for the voting public, it is an important one.
For the study we commissioned, PwC looked at two possible exit scenarios and their impact. One was a “plain-sailing” option where a free trade deal is swiftly agreed with the EU and we maintain all of our trade deals with the rest of the world. This is about as optimistic as it gets, and even then there would be great uncertainty for business, with investment down and GDP as much as 3 per cent lower by 2020.
The other scenario sees the UK drop into World Trade Organisation rules, which would see the return of tariff barriers for business but the UK signing new trade deals.
The economy would slowly recover over time, but in either case the economy never quite tracks back to where it would have been if we had stayed in. Of course, the UK could survive outside the EU and, in time, the economy would grow again, but leaving the EU would mean a smaller economy in 2030 than choosing to stay.
The EU is not perfect and poorly thought-out regulations are a headache for businesses. But some of the savings that are often cited by the likes of Leave.eu are illusory. Take the Working Time Directive: most of the cost of this comes from annual holiday and rest break entitlements. Is ending paid holiday the kind of savings from regulation that Leave.eu mean? Any savings from reduced EU budget contributions and regulation would be greatly outweighed by the negative impact on trade and investment.
The benefits of being part of the EU mean the UK goes “toe-to-toe” with other economic giants around the world in trade negotiations. By leaving, we would most likely drop out of the EU trade deals we currently benefit from and have to renegotiate them from scratch. The UK could also end up at the back of the queue, with many countries preferring to negotiate comprehensive deals with larger regional blocs.
That’s just one reason why, in a recent independent poll of our members by ComRes, 80 per cent of CBI businesses wish to remain in the EU – just 5 per cent want to leave. That’s small, medium and large firms, which operate in every corner of the UK and across every business sector – together they employ nearly 7m people. Recent business surveys have covered smaller and mid-sized firms, as much as large, and they demonstrate majority support for remaining within the EU – that is the mainstream business view.
The challenge to those pushing for the UK to leave is to make the economic case for how the UK would be better off outside the EU. When presented with solid economic analysis from numerous respected bodies, they choose to cherry-pick, ignore the facts or claim scare-mongering. This is one of the biggest decisions we will get to vote on in our lifetimes – and the most profound impact will be on the next generation – so the public deserves to hear sober economic analysis from both sides of the debate.