The Cost of Brexit

On June 23rd, UK citizens would vote in a referendum whether Britain should stay or leave the European Union (EU). This is commonly referred to as 'Brexit'. This has been a major source of concern to many world leaders, organisations and businesses. Big firms such as Ford and BMW are against Brexit.

The economic consequences of leaving the EU is huge. The cost and benefits of Brexit  has been largely exaggerated by many campaigners.

According to the Organisation for Economic Co-operation and Development (OECD), a UK exit from EU would result in GDP being 3% lower by 2020 . There would be low productivity. Since 2008 recession, Britain growth has been on a nose-dive. Workers wages has greatly reduced over the years.

Economic consequences

The UK joined the European Economic Community in 1973 and it has enjoyed tremendous benefits. The EU is the UK most important trade partner. Goods and Services are cheaper for UK consumers because of lower trade barriers. A good percentage of UK exports goes to EU countries. Already the manufacturing sector is not healthy. Should UK leave, the manufacturing sector would suffer hard. There would be lower trade between UK and EU, higher tariffs and would not benefit from market integration within the EU.

Leaving the EU would also affect foreign Direct Investment, Immigration and economic regulation which would lead to further declines in income

EU has negotiated quite a number of Free Trade Agreements that deal with issues such as tariff reduction, government procurement and protection of intellectual property rights. Currently the EU is negotiating on new Free Trade Agreements with United States, Transatlantic Trade and Investment Partnership (TTIP) and Economic Partnership Agreement (EPA) with Japan. If UK leaves the EU it will not benefit from these and other Free Trade Agreements negotiated by EU in future.

Conclusion

Many have argued that the main benefit of leaving the EU is that UK net contribution to EU budget would be lowered.

With all these economic consequences highlighted, it is better for Britain to remain in the EU and target a long term trajectory of solid growth.