Niesr wades into Brexit debate with the latest assessment of how the UK economy would fare after Brexit
The UK economy could be up to eight per cent smaller if it votes to leave the European Union in the upcoming referendum, according to the National Institute for Economic and Social Research (Niesr).
Brexit "would represent a significant shock to the UK economy," and would leave the economy between 1.5 per cent and 7.8 per cent smaller by 2030, new analysis from the think tank has found.
Average wages, household consumption and trade would all fall after Brexit – with the extent of the decline depending on which model the UK follows after leaving. Sterling would also depreciate, the group predicts, as it could reach parity with the euro (currently one pound will buy €1.27), causing inflation to spike by two to four per cent.
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"Real wages would bear the brunt of the adjustment," Niesr said. "By 2030, we estimate that real consumer wages would be between 2.2 per cent and seven per cent lower outside the EU than they would be remaining in the EU."
In the short-term, GDP growth would come in at two per cent next year – considerably off the 2.7 per cent Niesr thinks the UK economy will chalk up if it votes to stay inside the EU.
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On the back of falling trade and slower wage growth, annual consumption per person would be between £500 and £2,000 lower outside of the EU, in inflation-adjusted terms. This finding corresponds with the Treasury's analysis, published to much controversy last month, which argued UK households would be £4,700 worse off in the event of Brexit.
The analysis also chimes with a similar study published by the Organisation for Economic Co-operation and Development (OECD), but stands in contrast to work by the pro-Leave Economists for Brexit group. In a report in April, it argued that disposable incomes would climb by 1.5 per cent after Brexit, unemployment would fall by 75,000 and food prices would fall by up to 20 per cent.