The Organisation for Economic Co-operation and Development (OECD) issued a stark picture of what a British exit from the European Union would mean for the UK economy this morning.
That UK would be worse off “for generations to come” according to the OECD was just one of a number of comments and charts published today that will be seized upon by both sides of the referendum campaign.
The figures put together by the OECD are in the same ball park as those conjured up in the Treasury that caused uproar last week.
GDP to be three per cent lower just four years after leaving the European Union
Households to be £2,200 worse off as a result of Brexit by 2020
Costs of up to £5,000 per family by 2030 if the UK does not secure a "good" exit
Government deficit to be 0.9 percentage points of GDP higher – equivalent to around £17bn
The OECD report, a jam-packed 37 pages of economic analysis full of statistical analysis from no fewer than nine top economists, talks about:
A "Brexit tax" on households if Britain leaves the EU
Costs per household that are equivalent to “missing one month’s income”
A generational and “consistent loss” to UK growth
“No economic benefit” from voting to leave
Brexit would deal a “severe negative shock” to the UK economy that would “weaken GDP growth for many years”
Leave campaigners are well-versed in responding to warnings about how Brexit would damage the UK economy. Today was no different, Vote Leave hit right back with some tasty quotes of its own:
"The OECD has made a series of extremely pessimistic and unrealistic assumptions"
"Despite it making every possible worst case assumption, it is still forced to admit that the British economy will continue to grow"
- "Unsurprisingly the EU-funded OECD has not acknowledged any of the positive economic benefits of leaving the EU"
In its chart-laden dossier the OECD covers everything from what Brexit would look like for the UK, the EU and even how many Google searches there are relating to the EU referendum (a lot, in case you were wondering).
The short-term hit
The OECD said GDP would be hit by 3.3 per cent by 2020 – an equivalent hit of £2,200 per household.
|GDP||3.3 per cent smaller|
|Household cost||£2,200 equivalent loss|
Even in the most optimistic scenario, GDP would still be 2.2 per cent smaller in 2030 than it would have been had the UK stayed in the EU. In the worst case scenario, UK households would be £5,000 worse off.
Google searches for Brexit spiked around the time David Cameron secured his renegotiation and set the date for the vote, but they haven't exactly calmed down since.
Unsurprisingly, we're a little more interested in the latest Brexit chat than our European colleagues – but they're certainly taking an interest.
(Not so) free trade
The OECD also warned that the UK was unlikely to be able to wrap up a trade deal with Europe in good speed.
|Trade negotiation||Time (years)|
|Switzerland – China||Four|
|EU – South Korea||Four|
|EU – Mexico||Four|
|US – Australia||Three|
|EU – Canada||Five (not yet in force)|
|EU – Switzerland||10|
A trade deal might be made even more complicated by shrinking UK exports. The OECD thinks sales to the whole world, not just the EU, would tumble after a vote to leave.
|Factor||"Most favoured nation" rules||Free trade agreement|
|Total UK Exports||Drop 8.1 per cent||Drop 6.4 per cent|
|Intermediaries||Drop 8.4 per cent||Drop 6.4 per cent|
|Final goods||Drop 8.2 per cent||Drop 6.9 percent|
|Capital goods||Drop 6.1 per cent||Drop 5.6 per cent|
Dragging them down
Europe stands to lose from a Brexit as well, according to the OECD. Not quite as much as the UK would, but it will still take a hit in terms of forgone GDP.