Europe: in or out and what it means for the economy

Posted on 25 May 2015 by

There’s a lot riding on the UK’s inclusion in the EU, and for many the economy is the central focus of the discussion. If Britain were to leave the European Union then a great deal would depend on the trade deals brokered with the EU and the rest of the world upon its exit, and many businesses don’t like that uncertainty. It’s a complex beast, but to make the argument a little easier to swallow let’s take a look at the best and worse case scenarios for a British EU exit after the next referendum.

The best case scenario for Britain leaving the EU

The think tank group, Open Europe, have done some extensive research on what they think might happen after an exit from the EU. They considered potential trading deals and extrapolated the potential effects of these deals and what they mean for the country as a whole.  According to their research, the best case scenario would be that Britain would be better off by 1.6% of GDP per year by 2030. How? Widespread deregulation and very favourable (but not unrealistic) trade deals. They added, “A far more realistic range is between a 0.8% permanent loss to GDP in 2030 and a 0.6% permanent gain in GDP in 2030, in scenarios where Britain mixes policy approaches” so there are certainly a whole host of variables to consider.

The worst case scenario for Britain leaving the EU

For every best case scenario study there seem to be a dozen worst case scenario studies. The Center For Economic Performance based at the London School of Economics say, based on their data and research, that Britain could see reductions in GDP of up to 9.5%. To put that into perspective that’s a loss similar in size to that resulting from the global financial crisis of 2008/9. Their best case scenario was extremely conservative too, claiming that at the very best Britain should expect a 2.2% average hit to their GDP over the course of the next 10 years.

Of course, there is a lot more at stake here than how Britain fairs economically. The political landscape, commercial production and manufacturing and their very influence on the world stage could all either suffer or flourish. The forthcoming referendum is going to see the British public making an enormous decision which could have powerful effects on businesses both large and small.

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