In exactly two weeks from now, in arguably the most important referendum in generations, UK voters will be making a decision on whether or not to leave the European Union (EU).
So should the majority vote leave, giving the Brexit campaign a win, what will the implications be for the UK and European economies?
The impact on the UK economy
The expected impact on the UK economy varies wildly depending upon your standpoint:
- OUT – those who want out will argue the UK will make huge savings each year by leaving the EU, and the country will be far better off as it can take control of its own affairs.
- IN – those who want to remain, on the other hand, maintain that leaving the EU would seriously undermine the British economy by forcing the government to renegotiate its trade and investment relationships with EU members.The think tank Open Europe projected last March that a worst-case Brexit scenario would cost the U.K. 2.2 percent of GDP by 2030; best-case scenario is that GDP would rise 1.6 percent over the same period.
The truth is no-one can really know for certain what the implications will be, but there are plenty of think tanks that have done their sums and put forecasts together for the impending boom or bust, depending upon which side of the fence you sit.
The Open Europe think tank projected that a worst case exit scenario would cost the UK 2.2% of GDP, while the best case would see a 1.6% growth in GDP over the same period.
The trouble is, no country has ever left the EU so there is no precedent set, meaning no-one really knows what the impact will be – so it’s simply going to be a big step into the unknown.
Economic impact on the EU
Although it’s near impossible to calculate the economic impact an exit will have on the UK, it’s slightly easier to work out how it will affect the EU.
As things stand, the UK currently contributes 5.8 of the EU’s operating budget – this accounts for a third of all foreign direct investment into the EU and is second only to Germany.
And so if the UK were to leave, the EU would lose 15% of its GDP.
There are also demographic questions to consider – it’s unclear what will happen to the 2 million people from other EU countries currently working in the UK, and the same goes for the 1.26 million UK citizens currently scattered across the rest of the EU.
The truth is, no-one really knows what will happen should the UK exit Europe – it’s up to the voters to weigh up the facts and make an educated guess.