Economists Blast Brexit
Adding to the chorus of political voices, the last weeks leading up to the June 23rd referendum saw the Leave camp’s support crumbling in the face of a poll of economic experts with strong opinions about the potentially damaging repercussions of a Brexit.
The 639 economists surveyed indicated that, in their professional opinions, the negative consequences of a vote to leave outweigh any benefit. Royal Economic Society (and the Society of Business Economists) members responded to an online survey conducted by Ipsos MORI for the Observer; a majority concluding that a vote for Brexit would be bad for Britain’s economy.
Almost nine-tenths believe that Britain’s gross domestic product would be damaged in the coming 5 years by leaving the single market and EU. Only 7pc thought Britain’s GDP would not be affected. A mere 4pc believe exiting the EU would have a positive impact on GDP in the coming five years. Three quarters of the economists expected long reaching consequences over the next 10 to 20 years should the UK leave the EU. Only 11pc who were polled thought that a positive impact on real GDP would be the most likely outcome.
UK household incomes would be reduced over the next 10 to 20 years after a Brexit, thought three quarters of the economists. Only 10pc expected that UK earners would see incomes rise, whilst slightly more anticipated there would be no impact.
The consensus amongst economic experts, ranging from the IMF and the OECD to the Bank of England, was supported by Peter Sutherland, the former director-general of The World Trade Organision, who has darkly warned that the UK’s economy cannot rely on WTO’s rules in a Brexit scenario. He pointed out that manufacturers could face “a new ball game of appalling complexity” with increased regulation and tariffs. He also said that the UK’s services sector which makes up more than three-quarters of the UK’s economy would be negatively impacted.
The banking system of Britain, he pointed out, would be dealt “a huge blow” for the reason that "at the moment the banking system of Britain provides services all over Europe because by being part of the European Union they have what's called a single passport and they can operate everywhere.” Without this single passport he predicts that many companies would move out of the UK, preferring not to have headquarters in a non-EU country.
Analysts at JWG had already opined that leaving the European Union would cost Britain's financial services an estimated 17 billion pounds through to 2026, and that is without the additional costs of non-compliance fines which can’t begin to be speculated at this point. Estimates by some predict the loss of 820,000 jobs as result of the UK economy shrinking by approximately 6% by 2030.
Fearful Figures for Pensioners
In a bid to convince elders (who are seen to be largely in the Leave camp) to remain in the European Union, David Cameron has warned that exiting the single market would pose a threat to UK pensioners at home and abroad.
Brexit would create risks for pensions and investments and might pressurise people to retire at a later age than planned, possibly if the value of their homes fell. Without providing specific instances of how this would come about under a Brexit, he also spoke of homes abroad dropping in value, adding that those enjoying reciprocal health benefits overseas would see those privileges ceased. The 100,000 Europeans working in UK care homes, he said, might return to their home countries if their visas and residency permits did not continue to be secured.
The Prime Minister has previously warned that Brexit could cost taxpayers £4,300 per household each year, while costs for food and clothing would rise by £220 a year on average. Holidays, that are already more expensive than last year given the poorer exchange rate, would be far more expensive he also warned. The basis of this argument is largely the prediction that Sterling is expected to fall sharply in the event of a Brexit.
Sterling Pinned to The Polls
Only days after the economist’s poll and other voices had reduced the support for the Brexit campaign, the recent results of ORB International’s poll took on board the latest alarming immigration estimates and once again boosted the Brexit Campaign. It effectively trimmed last week’s widening gap between the Remain supporters from 13 points down to a 5-point gap. With estimates that immigration had reached record levels and that remaining in the EU would increase the UK’s population by 4 million immigrants, those most recently polled reacted with renewed concerns about border controls.
As has been seen for months, Sterling has been at the mercy of Brexit polls as well as warnings issued from global leaders, falling when the likelihood of a Brexit increased and rising when Cameron’s Remain position seems stronger. The British pound rose to the best euro exchange rates seen in almost four months immediately after an EU referendum poll indicated that over 50pc of those questioned opted to remain. When - less than a week later - the ICM Brexit telephone poll showed that a slight majority of 45pc supported Brexit, the pound fell below 1.4503 against the dollar.
Despite all the warnings from what has been dubbed “Project Fear”, cautioning the public about dire repercussions in case of a Brexit, most voters appear to be unconvinced. Over half don’t believe their standard of living would be altered in the five years after leaving EU, another poll by Ipsos MORI revealed. Market volatility may be the only thing that can safely be predicted this June.