Brexit ‘will cost workers month’s pay’ – warning
LEAVING the European Union will cost British workers the equivalent of a month’s pay by the end of the decade, a leading international economic body has warned.
The Organisation for Economic Cooperation and Development (OECD) said the impact of Brexit would be akin to imposing a tax on UK national income – creating a “persistent and rising cost” to the economy.
The warning came as Chancellor George Osborne said a slowing of economic growth in the first three months of 2016 – down to 0.4% from 0.6% the previous quarter according to the ONS – showed fears of a Leave vote were “weighing on our economy”.
Leave campaigners, however, dismissed the findings, accusing the OECD of protecting its own interests.
The OECD estimates that by 2020 GDP would be more than 3% down on what it would have been if Britain had remained in the EU – the equivalent of £2,200 per household at today’s prices.
Under the OECD’s “central scenario”, by 2030 the loss of GDP would have risen to more than 5%– a loss of £3,200 per household.
In a more pessimistic scenario, however, the costs of leaving would be even higher, rising to £5,000 per household.
“A UK exit would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD, particularly other European countries,” the OECD said.
“In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU.”
In its analysis, the 34-nation OECD said that uncertainty about the outcome of the June 23 referendum was already hurting business confidence, causing a weakening of UK economic growth.
If there was a vote for Leave, the short-term impacts would include a further heightening of economic uncertainty, leading to a tightening of financial conditions, with spending decisions held back as the cost of credit increased while availability reduced.
The loss of unrestricted access to the EU single market – as well as preferential access to 53 non-EU markets – would mean higher tariffs for goods and reduced access for financial services, resulting in a fall-off in trade with the EU.
Curbs to the free movement of labour from the EU, as well as an overall weakening of the economy, would reduce the incentives for economic migration to the UK – which has accounted for half of GDP growth since 2005 – and would be a further “cost”.
In the longer term, the OECD said that leaving the EU would continue to generate “substantial structural changes” to the economy, with reduced foreign investment in the UK leading to lower investment in business and a decline over time in capital stock.
Economic growth would be further reduced due to the smaller pool of skills available, stemming from lower immigration and lower foreign investment, leading to a decline in managerial quality.
However, Vote Leave spokesman Robert Oxley dismissed the findings, accusing the OECD and its secretary general Angel Gurria of protecting their own interests.
“The OECD is in the pay of the EU. Jose Angel Gurria is part of a global bureaucracy that feathers its nest with vast expenses claims paid for by taxpayers,” he said.
“The OECD ... recommended that we should join the euro. So why should we listen to their doom-laden predictions about leaving the EU?”