OECD says exit from European Union bad for UK
12 March 2016
The chief economist at the Organisation for Economic Cooperation and Development (OECD), Catherine Mann, has said that if Britain votes to exit the European Union, it would not just be bad for the country, but also for Europe and the global economy.
Ms. Mann also said that she was not convinced by the London mayor’s argument that the long-term benefits of exiting the bloc would outweigh the short-term disadvantages. The OCED backs Prime Minister David Cameron’s stance on staying with the 28-nation economic bloc.
Ms. Mann pointed out that 40 per cent of the trade from the UK goes to continental Europe. Should the nation exit from the EU, this trade will face tariffs, making it more expensive. She also added the separation from the bloc would take two years, which is a long time for this uncertainty to last. Ms. Mann also said that financial services were not covered by the WTO agreements, and hence, the country would be hit hard.
The chief economist went on to predict that the UK would no longer be an attractive destination for foreign investors if it left the European Union. Instead, companies would prefer other European nations.
"If you are outside [the European Union] trying to decide where to do investment, where are you going to go - to the one that’s big or the one that has just left?" said Ms. Mann.
French bank Société Générale has published a report with similar conclusions. The report says that considering there is a 45 per cent chance of Britain exiting the EU, the country’s exports would take a hit averaging 2.5% a year for the next 10 years. The report also stated that the financial services sector and foreign direct investment would take a hit. The exit would affect the whole of Europe and not just the UK; the report went on to state.
Prime Minister David Cameron tried to explain what the shock of exiting the bloc meant. "It means pressure on the pound sterling. It means jobs being lost. It means mortgage rates might rise. It means businesses closing. It means hard-working people losing their livelihood." He had a message for those who were advocating leaving the European Union.
Mr. Cameron said a hurting economy and lost jobs would be the collateral damage from an exit - a price that he is not willing to pay. He said for him, nothing was more important than protecting the financial security of the people and that is why he feels Britain should vote to stay in the EU.
However, many of those campaigning to leave the EU feel these claims are meant to create fear in the minds of the people. Leave campaigners are counter-attacking by saying that the vote to remain in the bloc is a riskier option.
London mayor Boris Johnson opined that initially after leaving the EU, Britain would be hit hard. However, once the shock had worn off, the country would bounce back strongly.
The OECD will be publishing a report on the possible effects of the UK leaving the European Union. This report will be published before the June referendum.