The Organization for Economic Cooperation and Development (OECD) issued a policy paper this week on the matter of Great Britain’s exit from the European Union (EU), often called “Brexit.” According to the OECD, exiting the EU would cause “a major negative shock to the UK economy.” Thus, the organization has strongly warned against Brexit.
In its policy paper, the OECD strongly condemns Great Britain’s possible plans for exiting the EU. The paper primarily focuses on the likely negative consequences, citing serious risks to both the British economy as well as the rest of the EU and other member nations of the OECD.
According to the OECD policy paper, called “The Economic Consequences of Brexit: A Taxing Decision,” opting to leave the European Union “would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD, particularly other European countries.
In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU.”
Based on this analysis, the OECD policy paper predicts that by 2020, the United Kingdom’s gross domestic product (GDP) would drop by more than three percent due to Brexit than if the nation remained a part of the European Union.
That would be the equivalent of every household in the UK giving up £2,200 per year. This gap would likely widen, according to the report, so that by 2030 the GDP shortfall would grow to greater than five percent, or £3,200 per household.
With this information, many wonder if British voters might change their opinion on the wisdom of Brexit. Unfortunately, according to a flash poll by Ipsos Mori, it appears that two-thirds of British voters do not believe that Brexit will have any impact on their income or standard of living.
Worse, voters who were inclined to remain in the EU are more likely to change position on Brexit if remaining in the EU posed a threat to their standard of living. On the other hand, voters who were committed to Brexit were relatively unwilling to change their position, even if they might suffer a financial or lifestyle loss as a result: just seven percent said they would change their position if Brexit left them £500 worse off each year.
Sadly, the OECD report is nothing new. Similar conclusions have issued from the UK Treasury, the LSE’s Centre for Economic Performance, and the Confederation of British Industries. Brexit goes to a public referendum on June 23.