Leaving the EU would cause a serious shock to the UK economy with a potential cost to gross domestic product (GDP) of £100 billion and a loss of 950,000 jobs by 2020, said Carolyn Fairbairn, director-general of British employers’ organization the Confederation of British Industry (CBI).
Leaving the EU would have “negative echoes that could last many years,” said Fairbairn.
The CBI said that in an economics lecture at the London Business School, it will analyse the potential impact of the UK leaving the EU — on trade, investment, jobs and growth.
The CBI commissioned professional services firm PwC to examine two different exit scenarios — one at the optimistic end of the range and the other recognising the likelihood of difficult trade negotiations but with trade deals being concluded.
“Under both PwC scenarios, UK living standards, GDP and employment are significantly reduced compared with staying,” said the CBI.
The analysis indicates a cost to the British economy of leaving the EU of as much as £100 billion — the equivalent of around 5% of GDP — by 2020.
Even in a scenario where a Free Trade Agreement with the EU is secured rapidly, the analysis indicates GDP could be 3% lower by 2020.
GDP per household in 2020 could be between £2,100 and £3,700 lower, and the UK’s unemployment rate between 2 and 3 percentage points higher, than if the UK had remained in the EU.
GDP growth in the years 2017-2020 could be seriously reduced, and possibly be as low as zero in 2017 or 2018, the CBI said.
“This analysis shows very clearly why leaving the European Union would be a real blow for living standards, jobs and growth,” said Fairbairn.
“The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment.
“Even in the best case this would cause a serious shock to the UK economy.
“By 2020, the overall cost to the economy could be as much as £100 billion and 950,000 jobs.
“Household income in 2020 could be up to £3,700 lower than it would otherwise have been.
“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.
“The findings from PwC’s independent study also explain why the majority of UK businesses are in favour of remaining within the European Union.
“Even under optimistic assumptions, an exit triggers serious economic disruption.”