British exit could put EU in jeopardy - OECD
Published 28/04/2016 | 02:30
The OECD has weighed into the debate on Brexit with a stark warning that a British withdrawal from the European Union could spark an international financial shock and doubts over the future of the Single Market and EU.
In a detailed report, the Paris-based think tank said a Brexit would cost UK households up to £5,000 (€6,428) in a worst case scenario, as the UK economy would be around 5pc smaller than if it remained in the EU.
The report comes as Central Bank governor Professor Philip Lane suggested contingency planning for a Brexit is difficult given the levels of unknowns. He said the regulator was liaising with the banks to ensure they are taking steps to prepare, but suggested there were limits to what could be done.
"The unknown unknowns mean you can't write down every possibility at this point," he said.
The OECD said sterling would slump in the event of a Brexit, which would have a major knock-on effect for Irish exporters. Angel Gurria, OECD secretary general, said Britain would have less access to the bloc's single market of 500 million consumers, investment would slow and companies could move to other countries as a result.
Prof Lane said the exact nature of a UK exit would play out over a protracted period. "The world is not going to end on June 23, whichever the result is," added Financial Regulator and Deputy Governor Cyril Roux.
Asked if he knew of any companies looking to move to Ireland amid Brexit-related concerns, Mr Roux said he was seeing a "suspension of decisions".
"Those who may invest in the UK or in Ireland will assess the result of the vote and make a decision on that basis. But I wouldn't expect that there would be a flurry of applications on June 24. It takes a significant amount of time," he said.
The OECD report said membership of the EU had contributed to the economic prosperity of the UK. It pointed out that Ireland, which also joined in 1973, had a near "quadrupling of its GDP per capita" as a result.
It also said that concerns are rising about the possibility of a Brexit across EU countries, with the number of Google searches having spiked. The term is searched for the most in Britain, followed by Ireland, it said.
"Following the UK decision to exit, there could be doubts about the future of the Single Market, and more broadly, of the EU," the report said.
Mr Gurria took aim at the "Out" campaigners, accusing them of creating a "delusion" by saying the country would prosper outside the EU. He said official figures showing Britain's growth slowed in the first three months of the year underscored how the possibility of a Brexit was weighing on confidence. Mr Gurria said there would be no economic benefits for Britain from a Brexit.
"Our conclusion is unequivocal," he said. "The UK is much stronger as a part of Europe and Europe is much stronger with the UK as a driving force. There is no upside for the UK in Brexit, only costs that can be avoided."
The "Vote Leave" camp challenged the OECD's credibility, saying it had damaged its reputation by promoting the benefits of the euro currency.
"After (we) Vote Leave and take back control we will be able to cut our tax bill because we will no longer have to fund overpaid and under-taxed international bureaucrats," Vote Leave spokesman Robert Oxley said.