A "Brexit" or British exit from the European Union may dent the UK economy and cost nearly £100 billion and 1 million jobs, a report from the Confederation of British Industry (CBI) found.
During an economics talk at the London Business School, CBI looked into the possible effects of the UK leaving the Union, in terms of jobs, investments, trade and overall growth. The results are pretty disappointing.
"This analysis shows very clearly why leaving the European Union would be a real blow for living standards, jobs and growth," says CBI Director General Carolyn Fairbairn.
Two Scenarios When The UK Leaves EU
To come up with numbers that will present the impacts of Brexit to the economy, CBI got help from a professional services company, PwC. Together, they examined the impacts of two possible scenarios: Britain signs a free trade agreement with the EU, and Britain conducts business as a member of the World Trade Organization.
Both scenarios show that the living standards, employment situation and GDP will plummet if Britain decides to leave. As per estimates, GDP will decline by about 5 percent by the year 2020.
Even under a free trade agreement with the Union, GDP may still reduce by 3 percent by 2020.
Effects On Households, Jobs
Per household, GDP rates are projected to be between £2,100 and £3,700 lower. The exit will also take a toll on the unemployment rate, as the report estimates it to shoot up by 2 to 3 percent.
While Britain may save from paying EU contributions, the negative effects on trade and economy will be much greater.
Impact On Businesses
Aside from the effects of Brexit to the economy. PwC also looked into the impacts of the move to businesses. The firm found that most UK businesses would like the country to stay within the EU, because even if there are some optimistic assumptions, a Brexit would still cause economic disturbances.
Under the scenario of the Free Trade Agreement, tariff-free imports and exports will be negotiated between the UK and entire Europe by the year 2020. The UK is anticipated to hold on to its current free trade agreements with other EU member countries and sign a new deal with the U.S.
Under the WTO scenario, UK will face tariff and non-tariff hindrances significantly. The UK will lose its current free trade agreements with other nations, but may re-discuss under the same conditions by the year 2026, together with a U.S. deal.
Fairbairn says it is difficult to see situations wherein the UK can get better deals outside of the EU. Brexit can topple UK's biggest sectors. Moreover, with the current trends, now may be the worst time to leave.
In the end, Fairbairn says there seems to be no better option that can give the UK same benefits that it is currently reaping from EU.
A Brexit would unlikely make the UK recover in the next one and a half decade. The best case situation, 550,000 jobs could be lost in the next four years, when the UK is trading under WTO rules.
Photo: Alan Light | Flickr