Less than two months before Britain’s historic vote over whether to remain in the European Union, voters remain deeply divided over the decision. But among economists, there is little question that a so-called Brexit would be costly.
The latest analysis was released Wednesday morning by the influential Organization for Economic Cooperation and Development. It estimated the United Kingdom’s economy would be 3 percent smaller in 2020 if Britain leaves the E.U., damaging consumer confidence, discouraging business investment and unleashing a new era of uncertainty in the financial center of Europe.
The numbers translate into an average reduction of 2,200 pounds ($3,206) per household in Britain — the equivalent of a month’s pay, the group said. Angel Gurría, OECD secretary-general, dubbed the impact a “Brexit tax.”
The long-term consequences could be even more dire, the group said. Under its most optimistic scenario, the hit to the U.K. economy would total 2.7 percent of its gross domestic product by 2030. But the worst-case estimate is a blow of more than 7.5 percent, or 5,000 pounds per household.
“The U.K. is much stronger as a part of Europe, and Europe is much stronger with the U.K. as a driving force,” Gurría said. “There is no upside for the U.K. in Brexit.”
If Britons vote to leave the E.U. on June 23, the decision would kick off a lengthy negotiation over the terms of its departure that would last at least two years. Proponents argue that an independent U.K. would be able to secure more favorable trade deals on its own. But during his visit to London last week, President Obama warned that Britain would move “to the back of the queue” for consideration of any trade deal.
In his speech Wednesday, Gurría said the expectation of better trade terms after Brexit was “delusional.” Business investment has already begun to decline, he said, while the pound has lost ground against other currencies and financial markets are bracing for volatility around the referendum.
The OECD’s estimates echo recent analysis by the U.K. Treasury and the London School of Economics on the cost of Brexit. Even the think tank Open Europe, which has been more skeptical of the benefits of the E.U., has forecast a 2.2 percent hit to the U.K. economy by 2030 in its worst-case scenario.
“What is striking about our estimates and those produced by most others is that all the numbers under a Brexit case are negative,” Gurría said. “The best outcome under Brexit is still worse than remaining an E.U. member, while the worst outcomes are very bad indeed.”