CBI: Brexit would ‘shock’ economy

MORE THAN HALF A MILLION jobs would be shed from the UK economy should the country vote to leave the EU on 23 June, with the after-effects lingering more than 15 years on.

That’s the stark prediction the CBI’s director-general Carolyn Fairbairn is making alongside research from PwC, suggesting the shock of a British exit could cut economic output between 3% and 5.4% in 2020, dependant on the quality of deals Britain manages to negotiate with its trading partners.

In the lobby group’s most optimistic forecast, GDP would be around 0.8% lower in 2030 than if the UK remains in the union.

In a speech at the London Business School today, Fairbairn will say: “The economy would slowly recover over time but never quite tracks back to where it would have been. Leaving the EU would mean a smaller economy in 2030.

“If we left the EU and our goods became more expensive for EU companies, they…would have plenty of alternative suppliers to import from within the single market. They could look to Germany or France to buy goods from without tariffs or customs. We would have fewer neighbours to choose from.”

Two scenarios; neither palatable

PwC’s analysis examined two scenarios in the event of Brexit. In the first, the UK would conclude a free-trade agreement with the EU but would not retain free movement of services, capital or labour. It would relax rules for highly skilled migrants but stop admitting low-skilled EU nationals.

In the second, negotiations would drag on and the UK would default to trading under World Trade Organisation rules while clamping down on migration.

Assessing the impact of a possible exit vote on the economy is difficult because no-one knows what the terms of the UK’s alternative relationship with the EU and other nations would be.

Out campaigners are split, too, on which model they favour in the event of a vote to leave. Norway, Switzerland and Canada all have differing trade arrangements with Europe and the question of which is preferable is a source of schism.

Despite that, Fairbairn’s intervention has provoked anger among ‘out’ campaigners, including Vote Leave, accusing the CBI and PwC of disseminating “skewed” evidence.

Fairbairn will say: “None of the alternatives on the table offer the same access to and influence over the EU single market as full EU membership.”

“On the impact for business – it is hard to see circumstances under which the UK could get a better set of deals on trade and investment outside the EU. Leaving the EU would hit some of the UK’s top sectors hardest. And current global uncertainty means that now could be one of the worst times to leave.”

Business leaders did not feel that the recent renegotiations of Britain’s relationship with the EU would impact on their overall thoughts about Brexit.