The Centre (CEP), a member of the London School of Economics and Political Science’s Research Laboratory and one of Europe’s leading economic research groups, offers an optimistic and pessimistic scenario if the UK were to leave the EU (the so-called Brexit). The pessimistic option would be “comparable to the decline in UK GDP during the global financial crisis of 2008-2009”, it says.
“While staying in the EU may cause political trouble for the major parties, if we leave the EU the economic trouble will be double,” the report concludes.
According to researchers Swati Dhingra, Gianmarco Ottaviano and Thomas Sampson, reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget.
They calculate that static losses due to lower trade with the EU would reduce UK GDP by between 1.1% in the optimistic scenario and 3.1% (£50 billion per year) in a pessimistic scenario. The losses due to lower foreign direct investment in the UK, less skilled immigration and the dynamic consequences of reduced trade could also be substantial, CEP says.
The full report, Should we stay or should we go, argues that ‘Brexit’ could mean the UK could restrict immigration from the rest of the EU while UK citizens would be likely to face reciprocal restrictions on their ability to work in EU countries.
“Economically, migration acts much like trade, as people tend to move to countries where they can be more productive and earn higher incomes, increasing total welfare. Restricting this mobility will, just like restricting trade, reduce overall UK welfare. Di Giovanni et al (2012) find that the maximum size of such effects would be a loss of 1.5% of income.
“A counter-argument used to support restrictions on labour mobility is that immigration from the EU has harmed UK-born workers in terms of jobs, wages and access to public services. But there is no compelling evidence that these negative effects exist (as shown in CEP’s Election Analysis of immigration and the UK labour market).”
CEP’s policy committee is drawn from business, academia and government and includes Today Programme and Newsnight host Evan Davis, Financial Times economics editor Chris Giles, Credit Suisse senior advisor Kate Barker, and National Audit Office chief economist Michael Kell.
• HR magazine will be examining the impact of the main political parties’ policies on HR next month
