The impact of a UK exit of the European Union would hit Britain harder than Germany or the rest of Europe, warns the Bertelsmann Stiftung, saying ‘Brexit” could shave 14% off the country’s GDP.
With the British general election on a knife edge, and the chances of a referendum on EU membership a distinct possibility, German think tank Bertelsmann Stiftung issued a stark warning.
If the United Kingdom exits the EU, “this would have long-term negative consequences for the country’s growth dynamic and economic vitality,” says the report by the Bertelsmann Stiftung, published on Monday (27 April).
“By contrast, the economic losses for Germany and the remaining EU member states would be significantly smaller,” the think tank claims although “everyone involved would lose economically and politically”.
Depending on the trade deal the UK managed to negotiate with the EU, the British economy could shrink between 0.6% and 3%, according to the report, with the GDP loss reaching as much as 14%.
This could leave the UK economy €300 billion worse off by 2030 than if the country remained in the EU.
The best case scenario would see GDP loses per capita of €220 in 2030. The worst case scenario could see loses of €4,850 per capita. Such losses would dwarf any potential savings, cancelling EU budget payments, which stand at 0.4% of UK GDP.
The report highlights the risk factor to specific sectors of the British economy. The chemicals industry would face the greatest loses, nearly 11% in the worst case scenario. The automotive industry and financial services should also expect to suffer from a Brexit.
“Above all, exiting the EU would increase the costs of trade between the UK and EU and reduce trade activities,” the report warned.
But all remaining member states would be negatively impacted.
“Everyone involved would lose economically,” said the report. Germany can expect GDP loses of between 0.1% and 0.3%, but Ireland, Luxembourg and Belgium would suffer the most from a UK exit.
All countries would need to contribute more to the EU budget, to make up for the shortfall from UK contributions. In the case of Germany, this would mean an extra €2.5 billion a year.
“A Brexit is a losing game for everyone in Europe from an economic perspective,” said Bertelsmann Stiftung Chairman Aart De Geus. “It would be an especially bitter setback for European integration as well as Europe’s place in the world.”
The Conservative party have promised to hold a referendum on EU membership before the end of 2017 if they win the general election on 7 May.
The major opposition part, Labour, have said they will only hold a referendum in the event of a significant transfer of powers from Westminster to Brussels.
The two parties are currently neck and neck in the polls.
>> Read: Countdown to the UK election
7 May: UK general election.
Read the full Bertelsmann Stiftung report on their website.