Brexit could lower UK GDP by 5% says the OECD

Jun 2, 2016

This article is published in collaboration with Business Insider.

The St George's Cross, European Union and Union flags fly outside a hotel in London, Britain, December 17, 2015. European Union leaders could clinch a deal with British Prime Minister David Cameron in February to prevent the bloc's second largest economy leaving, European Council President Donald Tusk said on Thursday. Cameron is seeking to renegotiate Britain's relationship with the bloc it joined in 1973 ahead of a referendum on membership to be held by the end of 2017. Some EU leaders are wary of agreeing to all of his demands, however, particularly on cutting benefits for EU migrants to Britain.

Britain's GDP could be 5% lower by 2030 if it leaves the EU compared to staying, according to a report by the OECD.

Image: REUTERS/Luke MacGregor

Matthew Nitch Smith

Finance Writer, Business Insider

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Britain's GDP could be 5% lower by 2030 if it leaves the EU compared to staying, according to a report by the Organization for Economic Cooperation and Development (OECD).

The trade alliance of 34 nations says a Brexit would hurt the whole world by leading to "economic uncertainty and hinder trade growth, with global effects being even stronger if the British withdrawal from the EU triggers volatility in financial markets."

Image: OECD

The EU GDP would fall 1% overall by 2020 if the UK left, the OECD projects, and "by 2018, there would be a significant hit to activity in other European economies, especially those who have strong economic linkages with the United Kingdom."

The ramifications would also go beyond the EU, with "many non-European economies also experiencing a decline in output due to weaker demand in Europe."

The OECD is downbeat on the state of the global economy overall, saying it was "stuck in a low-growth trap that will require more coordinated and comprehensive use of fiscal, monetary and structural policies to move to a higher growth path and ensure that promises are kept to both young and old."

Secretary-General Angel Gurría says:

Slower productivity growth and rising inequality pose further challenges. Comprehensive policy action is urgently needed to ensure that we get off this disappointing growth path and propel our economies to levels that will safeguard living standards for all.

Meanwhile, the EU referendum is still too close to call despite being just three weeks away. Opinion polls are all over the place — YouGov and ICM polls had the Remain and Leave sides neck and neck, though phone polls suggest Remain has a big advantage. Bookmakers are currently offering odds of 4/1 on a Brexit.

Chancellor George Osborne has been campaigning hard for Britain to remain in the EU, recently agreeing with the IMF that a Brexit would hurt UK investment and public spending.

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