Britain’s departure from the European Union could send shock waves across the global economy and threaten more than a trillion dollars in investment and trade with the United States.
International policymakers are ramping up their warnings of the dangers of a British exit – popularly known as “Brexit” — from the political and economic alliance that has united Europe for the past four decades. Voters in Britain will decide whether to leave or remain in the European Union in a referendum on Thursday, but financial market volatility has already spiked as polls show a growing desire to abandon the partnership.
The decision carries hefty consequences for American businesses, which employ more than a million people in Britain. The United States is the largest single investor in Britain, and many firms consider it the gateway to free trade with the 28 nations that make up the E.U. A Brexit would jeopardize their access to those markets, potentially reducing revenue and forcing some firms to consider relocating their European operations elsewhere. That has put corporate America onto the front lines of the campaign to keep the union together, with several of Wall Street’s biggest names donating substantial sums to the effort.
A Brexit would be “bad for the U.K., it would be bad for Europe, it would be bad for the world, including the United States,” Angel Gurría, secretary general of the Organization for Economic Cooperation and Development, said in an interview. “You already have enough uncertainty in the world today. We don’t need more.”
The International Monetary Fund on Friday issued one of the most dire forecasts to date, calling the impact of Britain’s departure from the European Union “negative and substantial.” The fund predicted that a Brexit could reduce economic growth by up to 5.6 percent over the next three years in its worst-case scenario. The gloomy outlook is driven by an expected sharp decline in the pound and severe disruptions in trade as the nation is forced to renegotiate deals with countries across the continent, potentially on worse terms.
Those concerns were echoed by policymakers around the world last week. The Bank of England called the referendum the “largest immediate risk facing U.K. financial markets, and possibly also global financial markets.” Finland’s finance minister dubbed Brexit a “Lehman Brothers moment,” referring to the collapse.