World / Europe

Brexit to be costly for Britain: CBI survey

(Xinhua) Updated: 2016-03-22 09:01

LONDON - Brexit would be more costly than remaining in the European Union (EU), according to a survey released Monday by the Confederation of British Industry (CBI).

The CBI representing businesses employing one third of the British workforce, commissioned professional services firm PricewaterhouseCoopers (PwC) to model two scenarios for Brexit after the referendum on June 23 on whether to stay in the EU or leave the bloc.

PwC said in its report there was more uncertainty outside the EU "particularly in terms of future trading relationships," and that the two contrasting scenarios were intended to "capture this uncertainty."

The optimistic scenario rested on Britain's achieving a free trade agreement with the EU within five years, while the pessimistic scenario modelled the trade conducted under current World Trade Organization (WTO) rules.

Under the optimistic scenario, Britain's GDP would be three percent lower in 2020 than what it would be if there was no Brexit, a reduction of 55 billion pounds (about 79 billion U.S. dollars) at 2015 prices, while under the pessimistic scenario, the economy would be 5.5 percent smaller, a reduction of 100 billion pounds at 2015 prices.

In the longer term, the disruptive effects of an exit would lessen, with GDP forecast to be between 1.2 percent and 3.5 percent smaller under the optimistic and pessimistic scenarios respectively, a cost of between 25 billion pounds and 65 billion pounds.

Carolyn Fairbairn, director general of the CBI, said at the unveiling of the report at the London Business School, that savings from reduced EU budget contributions and regulation would be "greatly outweighed by the negative impact on trade and investment."

She added: "Without a free trade deal, 90 percent of British exports to the EU, by value, could face tariffs. Some sectors could be hit particularly hard. Under WTO rules, British textile exports to the EU could face tariffs of nearly 10 percent. Transport equipment could face tariffs of about 7 percent."

Andrew Sentance, senior economic adviser to PwC, said: "The three big impacts of leaving the EU... are increased uncertainty, a negative shock to trade and investment, and reduced labor supply through migration."

He added: "While the potential to reduce the burden of regulation and lower fiscal contributions to the EU could be offsets, the net impact of Britain's leaving the EU is still likely to be negative for GDP, employment and living standards, both in the short term and the long term." 

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