Britain’s exit from the European Union could see its economy shrink by six percentage points smaller than it would otherwise have been and cause “permanent” economic damage, the country’s finance ministry will say in an analysis due out on Monday, according to media reports.
“The conclusion is clear: for Britain’s economy and for families, leaving the EU would be the most extraordinary self-inflicted wound,” Chancellor of the Exchequer George Osborne wrote in The Times newspaper.
“Leave the EU, and the facts are: Britain would be permanently poorer,” he said, adding that under all scenarios examined in the report Britain would have a “less open and interconnected economy”.
The six percent economic drop forecast was based on the assumption that in the event Britain left the bloc, it would negotiate a trade deal similar to the EU-Canada pact, British media reported.
The 200-page report has been months in the making and is the latest warning from the government about a so-called “Brexit” ahead of a referendum on Britain’s EU membership.
Britons will vote on 23 June on whether to remain in or leave the EU, and polls show the two camps neck and neck, while around a fifth of voters remain undecided.
The run-up to the vote is being closely watched across Europe and beyond because of its potentially far-reaching consequences.
The Treasury report is being published just days before US President Barack Obama is due in London on a visit in which he is expected to underline the importance of Britain staying in the EU.
The world’s G20 top economies last week warned that one of the looming risks to the global economy was “the shock of a potential UK exit from the European Union”.
International Monetary Fund chief Christine Lagarde has called on Britain and the EU to save a “long marriage”.
The IMF last week downgraded its forecast for British economic growth by 0.3 percentage points to 1.9 percent for 2016, although it held its 2017 forecast at 2.2 percent.
During his campaign for re-election in 2015, British Prime Minister David Cameron promised to renegotiate the UK's relations with the European Union and organise a referendum to decide whether or not Britain should remain in the 28-member bloc.
The British premier said he will campaign for Britain to remain in the EU after a two-day summit in Brussels where he obtained concessions from the 27 other EU leaders to give Britain “special status” in the EU.
But EU leaders had their red lines, and ruled out changing fundamental EU principles, such as the free movement of workers, and a ban on discriminating between workers from different EU states.
The decision on whether to stay or go could have far-reaching consequences for trade, investment and Great Britain's position on the international scene.
The campaign will be bitterly contested in a country with a long tradition of euroscepticism and a hostile right-wing press, with opinion polls showing Britons are almost evenly divided.
- 23 June: Brexit referendum
- 28-29 June: Possible dates for EU summit