THE UK economy could suffer a 6% contraction by 2030 should it leave the EU.
That’s the highly negative view from a 200-page Treasury analysis in the run up to the historic in-out membership vote on 23 June.
Chancellor George Osborne claims an EU exit would decrease the size of the economy to the extent that it equated to £4,300 per household.
However, the negative scenarios have been slated by Leave campaigners, such as Tory MP John Redwood, who told the BBC that “this is a Treasury which failed to forecast the huge damage membership of the ERM inflicted on us and they were always very keen to join us and it gave us a huge recession” and “they failed to forecast the damage to the UK of the Eurozone crisis of 2011.”
But Osborne has vigorously backed the report, penned by government economists, which according to the BBC, examines three possible scenarios in the event of leave vote on 23 June.
All three, the report says, will have a negative impact on the economy, but it is the option whereby the UK executes a bilateral deal with the EU much like that forged with Canada which is deemed the most negative, and would cause the UK economy to plunge by 6%.
Another possibility sees the UK gain a “Norway-style” deal and join the European Economic Area (EEA), while the final option posits the UK creating a trading link with the EU under World Trade Organization (WTO) rules, much like that between the EU and nations like Brazil.
Speaking on the Today programme, Osborne dubbed it as “economically illiterate to believe that Britain to cling to the “benefits” of EU membership while divorcing itself from the ensuing “obligations or costs”.
Meanwhile, Andrew Mackenzie, chief executive of BHP Billiton, is set to say at the Centre for European Reform today, that a vote to leave would lead to “many years, perhaps a decade, of renegotiation. And for what? To gain the access to markets we already have on terms that are likely worse”.
And in a report by the EY Item Club said British businesses will further invest in the UK but only if it votes to stay in the EU.
In yet another report, this time a survey by the Chartered Institute of Internal Auditors – just 21% of the heads of internal audit at FTSE 250 companies – say that their firms have made or are currently making contingency plans for the possibility of a British withdrawal from the EU.
The survey also found that 10% of the FTSE 250 Heads of Internal Audit said that they had no intention of making any contingency plans for a British withdrawal from the EU. 62% said that they planned to do so, but that it was not yet possible, due to uncertainty.
Ian Peters, chief executive of the institute, said: “The good news from our survey is that, clearly, Brexit is being considered by most FTSE 250 companies, at a senior level.
“However, our survey shows that most boards haven’t undertaken contingency planning yet, but most plan to. But the challenge is that uncertainties about what Brexit may mean are making planning very difficult at the moment.”
The outcome of the EU Referendum will be analysed by business leaders, economists and academics at the CFO Agenda on 28 June. The event for senior finance professionals includes a panel debate on the outcome of the landmark vote and a keynote address from former chancellor of the Exchequer Alistair Darling. Darling will talk about his experiences as chancellor, and his thoughts on the impact upon business of the UK’s EU Referendum.