Why Brexit will break Britain
Source: D Smith
To Brexit or not to Brexit – that is the big question every economist, politician and businessperson is mulling over at this point.
But come 23 June, the UK will settle this long winded debate once for all.
According to the UK’s largest business lobbying group, the CBI, the UK leaving the EU will leave the economy in dire straits.
Why? Take a look at these five big reasons:
1. Brexit could cost the UK economy a whopping £100bn
You heard Osborne’s Budget last week and the bleak outlook he set out for the UK economy for the next five years. Keeping that in mind, can we really afford to wipe £100bn off of the UK economy?
According to an analysis conducted by PricewaterhouseCoopers (PwC) for the CBI, Brexit could cost the UK economy £100bn or the equivalent of 5% of GDP by 2020.
The study also pointed out Brexit would cause long-lasting economic damage that the UK would never be able to recover from.
2. Impact on household incomes
The PwC research found that household incomes could be between £2,100 and £3,700 lower if Britain voted to leave the EU.
A report by the Centre for Economic Performance (CEP) at the London School of Economics released last week published similar findings.
The report said that in an “optimistic” scenario, the UK leaving the EU would knock off £850 per household. In a “pessimistic” scenario with larger increases in trade costs, Brexit will lower average incomes by £1,700 per household.
3. Unemployment and job losses
At 5.1%, the UK currently has the lowest unemployment rate in the EU. According to the CBI, Brexit could cause up to 950,000 job losses with unemployment rate going up two to three percentage points.
4. Investment in the UK
Another big disastrous ramification of the UK leaving the EU is the impact on trade relations.
The PwC study considers two scenarios for Brexit. In the first scenario, the UK would end up with a free-trade agreement with the EU but would not retain free movement of services, capital or labour. It would stop letting low-skilled EU nationals in the country but would relax rules for skilled migrants to work and live in the UK. In the second scenario, the UK would default to trading under World Trade Organisation (WTO) rules while cracking down on migration.
With a free trade agreement, investment would fall by 16% by 2020
Under the WTO scenario investment in Britain could fall by a quarter by 2020, and would still be 10% lower by 2030, compared with the UK staying in the EU.
5. Businesspeople don’t want the UK to leave the EU
In a poll conducted last week, 80% of CBI members said they want Britain to remain in the EU.
The CBI surveyed nearly 800 businesses out of which a majority felt Britain’s membership of the EU was “better for business, jobs and prosperity”.