- Study finds that reducing trade would lower living standards
- Trade effect offsets savings from lower EU budget payments
A British exit from the European Union would wipe as much as 6,400 pounds ($9,300) from average household incomes in the U.K. as trade deals sour, according to research by the London School of Economics.
“We consistently find that by reducing trade, ‘Brexit’ would lower U.K. living standards,” wrote Swati Dhingra, Gianmarco Ottaviano, Thomas Sampson and John Van Reenen at the LSE’s Centre for Economic Performance. “The fall in income per capita resulting from lower trade more than offsets any savings that the U.K. obtains from reduced fiscal contributions to the EU budget.”
The June 23 referendum has sparked a tense political debate, with champions of the EU pointing out that the bloc is the U.K.’s largest export market and Euroskeptics saying Britain should claw back sovereignty. While polls suggest the outcome is too close to call, bookmaker William Hill Plc said on Friday that the odds on an exit had shortened, indicating that outcome is becoming more likely.
The study’s baseline estimates imply that the effect of quitting the EU would be equivalent to a fall in U.K. income of between 1.3 percent and 2.6 percent, or a decline in average household income of between 850 pounds and 1,700 pounds per year. A more pessimistic scenario envisages effects on productivity growth and results in a reduction to national income by 6.3 percent to 9.5 percent, or 4,200 pounds to 6,400 pounds per household.
The view echoes that of economists including those at Goldman Sachs Group Inc. and BlackRock Inc., who have warned the vote puts trade at risk. On Thursday, Bank of England officials said uncertainty stemming from the referendum may hold back investment and economic growth.
In a sign of how fierce the debate has become, ‘Brexit’ campaigners were quick to criticize the CEP report, saying new trade deals would be struck and pointing out the LSE receives funding from the European Commission.
“These ridiculous claims lack credibility as they come from the same economic sages who said we would better off scrapping the pound,” said Matthew Elliott, who heads the Vote Leave campaign group. “It’s safer to take back control of our economy, our democracy and borders by voting ‘Leave.”’