The EU referendum and the British economy: the facts
In the latest of our myth busting in depth looks at the major EU Referendum debate we turn to spotlight on what both sides have to say about the economy and where the truth lies.
What Leavers say:
As a member of the EU, the UK has to send hundreds of millions of pounds to Brussels every week. After a Leave vote, the Government could use this cash to boost public services instead.
EU regulations are “highly damaging” to the economy, costing small businesses “millions” every week and making it more expensive to build schools and hospitals.
According to Boris Johnson, the eurozone is being “strangled” by stagnation, unemployment and a lack of growth – and the UK could soon be forced to help bail other countries out. Brussels may soon demand higher weekly budget contributions from all member states, including the UK, he claims.
What Remainers say:
Being part of Europe makes the UK economy stronger by helping businesses, creating jobs and keeping prices low. We get out more than we put in: Britain’s annual contribution to the EU is equivalent to £340 per household – but the bonus of European trade, investment, jobs and lower prices is worth £3,000 per household.
The UK enjoys more global clout as part of the EU’s 500-million-strong economy, benefiting from free trade agreements with 50 countries around the world.
George Osborne says a “Leave Vote” would trigger an “immediate and profound” financial shock which would tip the UK into a year-long recession.
The problem with economic forecasts is that they are just that: forecasts. There is no way of knowing exactly how the British economy would cope with a Brexit. However, the respected Institute for Fiscal Studies (IFS) has warned that there is very likely to be some significant damage to the economy if the UK does leave the EU.
Although it says leaving the EU would result in an immediate £8 billion boost to the UK’s coffers as we would no longer need to pay money to Brussels, this would be undermined by a shrinking economy. The Government of the day is likely to react to this by trying to save money, it says – meaning that Britons could face an extra two years of austerity measures post-Brexit.
However, some economists believe that once the initial economic shock of leaving the EU passed, the UK could find itself in a better position than before. Regulations governing businesses could be redrafted and new trade agreements could be signed with both the EU and other countries which would be more favourable for the UK, resulting in longer-term growth.
It should be said, though, that relatively few experts believe a post-Brexit future would be very rosy. In a recent Ipsos MORI poll of more than 600 economists, 72 per cent said a Leave vote would probably have a negative impact on UK growth for between 10 and 20 years.