Cameron moves to pull undecided voters back from the Brexit edge
With less than a month before the UK votes on whether or not to leave the European Union, its government issued its starkest warning yet about the dangers of a so-called Brexit.
A vote to leave could be expected to trigger a year-long recession, sparking a decline in the value of sterling and cost hundreds of thousands of jobs, the UK Treasury or finance department said yesterday.
Britain's most senior official in Brussels, meanwhile, said British banks and financial services firms would face trade barriers if the country left the EU.
"If Britain leaves it will lead to barriers to trade and that will damage the British economy, jobs and growth," EU financial services commissioner Jonathan Hill said.
British banks and other financial firms would have to set up a separate subsidiary with its own capital within the trading bloc, which is "neither cheap nor simple", Mr Hill said.
That is currently the case for other non-EU banks, including US and Swiss lenders that operate within the single market.
In London, the Treasury said that under a "cautious" forecast Britain's gross domestic product in 2018 would be 3.6pc points lower, post Brexit, than the current forecast of a 4.3pc increase.
Under a "severe shock" scenario, GDP would be 6 percentage points lower than otherwise, and house prices would fall about 10pc. The figures are included in a Treasury document assessing the short-term economic consequences of Brexit.
"The British people must ask themselves this question: can we knowingly vote for a recession?" Chancellor George Osborne said in a speech at the headquarters of home-improvement chain B&Q in England. "Does Britain really want this DIY recession?"
Mr Osborne and Prime Minister David Cameron are leading the remain campaign.
Their ruling Conservative Party is split down the middle on the issue, putting both men's careers on the line.
In November, Cameron offered a more optimistic view, saying Britain was a "thriving country" and "whether we could be successful outside the European Union is not the question".
Iain Duncan Smith, who quit as work and Pensions Secretary in March, accused the government of focusing on the negatives.
"They have today chosen only to produce the downside," he said. "That makes this report categorically unfair and biased."
Private equity investor Jon Moulton of Better Capital, Energy Minister Andrea Leadsom and Capital Economics chairman Roger Bootle joined more than 30 economists, politicians and business leaders in signing a statement saying the Treasury has consistently got forecasts wrong.
"The real risk to the economy is to stay tied to the failing single currency with an obligation to pay its bills," they wrote in the statement, emailed by the official Vote Leave campaign. "If we vote 'leave', we will substantially cut the current-account deficit and thus will be able to stabilize the economy. The same old scare stories simply don't wash."
The Treasury's warning of recession echoes that given by Bank of England Governor Mark Carney earlier this month. He is to testify at Parliament's Treasury Committee today in what could be a fraught exchange.
The pro-Europe sides' emphasis on risk is aimed at pushing undecided voters - estimated in polls to make up as much as a quarter of the electorate - into the "remain" camp. Recent polling has suggested that the "leave" side is losing ground.
A Brexit "is the self-destruct option," Mr Cameron said yesterday. "The stakes couldn't be higher, the risks couldn't be greater, and in my view, the choice couldn't be clearer. Leave Europe and put at risk what we've achieved. Stay in Europe and stay on the right track."