Leaving EU could cost Britain £56bn a year, report claims

Leaving the European Union could cost Britain £56 billion ($84 billion) a year by 2030 unless the country keeps its borders open, according to a research group.

A report by Open Europe sets out four scenarios, based on Britain exiting the EU on January 1st, 2018. In the worst case, a hostile exit, gross domestic product would be 2.2 percent lower than if the UK had stayed in the EU.

The best case, involving Britain reaching a free-trade deal with the rest of the EU and removing barriers to trade with the rest of the world, sees GDP increasing 1.6 per cent.

The best three scenarios require Britain to refrain from curbs on migration. “The kind of free-trade, open-economy approach Britain would need outside the EU is not compatible with a very restrictive labor-migration policy,” Open Europe director Mats Persson said. “If you open up your trade and your economy to more competition from the rest of the world and radically reduce your labor supply, you become even less competitive.”

Prime minister David Cameron has made a referendum on Britain’s membership of the bloc a key part of his Conservative party’s re-election strategy. While he has pledged to campaign for the UK to remain within a reformed EU, defections to the UK Independence Party have led him to harden his rhetoric.

Mr Cameron has pledged to curb migrants’ access to welfare if the Tories win on May 7th.

UKIP’s economy spokesman, Patrick O’Flynn, described the report as “unnecessarily pessimistic, and even tending to be alarmist” in an interview while campaigning in Heywood and Middleton, one of the party’s target seats in northern England.

“We believe Britain would be better off out of the EU, because we could easily negotiate a bespoke trade deal based on our enormous economic leverage,” O’Flynn said in an interview.

The party seeks immediate withdrawal from the EU as well as the introduction of an Australian-style system of admitting only immigrants who meet specific criteria. The most successful exit scenario would involve extensive deregulation and open Britain up to “politically very sensitive” levels of competition from other countries, Open Europe said. The most likely scenarios range between a 0.8 percent loss of GDP and a 0.6 per cent gain, depending on the policy mix. “Transforming Britain into the deregulated, free-trading economy it would need to become outside the EU sounds easy in theory, but in practice could come up against some serious political resistance within the UK itself,” Rodney Leach, Open Europe’s chairman, said in a statement.

“If the UK puts as much effort into reforming the EU as it would have to in order to make a success of Brexit, the UK and the EU would both be better off.”

Bloomberg