Press Release - Friday 18th March 2016
The Consequences of Brexit for UK Trade and Living Standards
Second in the new series of #CEPbrexit policy briefings from the Centre for Economic Performance
The most 'optimistic' post-Brexit scenario for UK trade - in which the country adopts Norway's model and remains part of the European Union (EU) single market - would see average incomes fall by £850 per household. But the post-Brexit loss of income from reduced trade and lower productivity could be as high as £6,400 per household, which is similar to the decline in UK GDP during the global financial crisis in 2008-09.
These are among the findings of new research by the Centre for Economic Performance (CEP) at the London School of Economics. The second report in a series of #CEPBrexit analyses examines how leaving the EU would affect UK living standards through trade. The report shows that:
"Our work leaves little doubt that there is a serious cost for real wages and pensions from leaving the EU. Even ignoring any chilling effect on foreign investment and productivity from Brexit, the income losses from lower trade are clear. Regulatory overhauls are unlikely to offset these losses to any great extent."
"The issue facing voters is whether they feel that the social and political benefits of Brexit outweigh the evidence that we will be poorer."
One of the report's authors, Thomas Sampson, adds:
"In the optimistic scenario where incomes shrink by only 1.3% we would - like Norway and Switzerland - have to pay into the EU budget and accept EU regulations that we had no say in deciding. What's more, there would still be free migration of labour.
"Given the politics, this makes the pessimistic outcome more likely."
Swati Dhingra, another member of the CEP team, says:
"Negotiating new free trade deals is tough. The UK won't automatically benefit from the EU's trade deals with the United States and Japan worth around 0.6% of GDP."
"We are under a fifth of the size of current single market, so although we won't have to pool our interests with the EU, we won't have as much bargaining clout."
For further information, contact:Swati Dhingra on +44 (0)20 7955 7804, Email: firstname.lastname@example.org
Gianmarco Ottaviano, Email: email@example.com
Thomas Sampson on +44 (0)20 7955 7408, Email: firstname.lastname@example.org
Anna Graham on +44 (0)20 7955 7673; Email: email@example.com
Romesh Vaitilingam on +44(0)7768 661095, Email: firstname.lastname@example.org
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