What would ‘Brexit’ from the EU look like?

http://www.theguardian.com/politics/2015/may/14/brexit-what-would-happen-if-britain-left-eu-european-union-referendum-uk

David Cameron’s electoral triumph has brought the prospect of a British withdrawal from the EU one step closer. The prime minister has vowed to reshape Britain’s ties with Europe before putting EU membership to a vote by 2017.

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But what would “Brexit” – a British exit from the 28-nation EU – look like? Eurosceptics argue that withdrawal would reverse immigration, save the taxpayer billions and free Britain from an economic burden. Europhiles counter that it would lead to deep economic uncertainty and cost thousands, possibly even millions, of jobs.

Our writers have drawn on the best available expertise to assess what Brexit would mean for growth, jobs, trade, immigration and Britain’s position in the world.

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The broad economy

There have been a few attempts to quantify what an exit from the EU would do to the size of the UK economy, despite the obvious pitfalls of trying to put a figure on a hypothetical situation that has a number of variables – such as what sort of trade deals are negotiated post Brexit (more of that below). Given the range of potential post-Brexit circumstances there is a broad range of estimates. Some argue the economy will suffer permanent losses on the back of weaker trade and investment. Others say freedom from the rules, as well as the costs, that come with EU membership would make Britain more prosperous.

Starting with the estimates that leaving would be a net loss to the UK economy, one analysis often cited is from researchers at the National Institute of Economic and Social Research in 2004. They found an exit from the EU would permanently reduce UK GDP by 2.25%, mainly because of lower foreign direct investment. That estimate is now old and, as the thinktank’s current head, Jonathan Portes, has pointed out, the world economy has changed considerably in the past decade.

Another analysis by economists at the Centre for Economic Performance (CEP), part of the London School of Economics, calculated the UK could suffer income falls of between 6.3% to 9.5% of GDP, similar to the loss resulting from the global financial crisis of 2008-09. That is under the researchers’ pessimistic scenario, in which the UK is not able to negotiate favourable trade terms. Under an optimistic scenario, in which the UK continues to have a free trade agreement (FTA) with the EU, losses would be 2.2% of GDP.


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About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

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