The economic impact of Brexit

As the war of words on both sides of the EU referendum debate build to the official start of campaigning on April 15, key aspects in focus continue to be immigration, political freedom and the economy. In this vein, the Confederation of British Industry (CBI) recently commissioned PricewaterhouseCoopers (PwC) to conduct an analysis of the potential economic fallout from a so-called Brexit.

Two main scenarios were considered - FTA and WTO. In the FTA scenario, it is assumed that the UK is able to arrange a free trade agreement with EU states and continue trading with them on a tariff-free basis. WTO refers to the chance that such an agreement is not feasible with the UK therefore resorting to becoming a World Trade Organisation 'most favoured nation'. Trade on this basis would not be tariff-free (more detailed explanations can be found in the PwC report).

One of the major results of the analysis was the projected long-term effects on GDP. As the chart here shows, in both Brexit scenario types, PwC predict that economic output will suffer. The initial 'shock' of the UK severing its ties with the EU are expected to have a heavy impact regardless of an FTA being in place or not.

GDP growth rates are forecast to match or exceed those in the base 'remain' scenario in the long-term, but the initial setback of leaving the union is projected to leave overall levels playing catch up for years to come.

You can read more on this subject at The Week.