Britain will need to make choices on trade, labour laws and the environment that could be unpopular with voters if it wants to offset the hit to its economy from any decision to leave the European Union, a think tank said on Wednesday (13 April).
Britain’s economic output would probably be between 0.5 and 1.5% smaller than it would otherwise be by 2030 if it decides to quit the bloc in a referendum in June, according to Open Europe, a euro-critical think tank.
That kind of impact would not be huge and new trade deals would help to make up for some of the difference. But agreements with big emerging economies could face grassroots opposition similar to recent protests over cheap Chinese steel imports which have decimated Britain’s steel industry, Open Europe said.
The stakes will be high for Britain’s historic role as a free-trading nation when it holds a referendum on whether to stay in the European Union on 23 June.
A post-EU Britain might also be tempted to drop the bloc’s rules on pay for temporary workers and on the number of hours employees can work, and scrap its environmental rules.
Such changes would help boost growth but could upset voters too, Raoul Ruparel, a co-director of Open Europe, said.
“The basic trade-off is: yes there are potential gains post-Brexit, but they are not easy,” he said. “Are people and politicians willing to do what is necessary to reap these gains? I don’t think the hard choices have been discussed enough.”
Campaigners who back a so-called Brexit say Britain’s economy would flourish if it left the EU because it could strike its own free trade deals and drop the bloc’s red tape. Prime Minister David Cameron is urging voters to stay in the bloc, saying a decision to leave would lead to years of uncertainty.
A former director of Open Europe is an adviser to Cameron on EU issues.
Another tough issue after a Brexit vote would be immigration. “Out” campaigners say leaving the EU is the only way to control record flows of migration into Britain.
Open Europe said countries such as Canada, Norway and Switzerland, which have been cited as models by the “Out” campaign, have higher levels of immigration than Britain and that it would still need low-paid workers from abroad.
A February deal allowing Britain to limit the free movement of workers coming from the European Union is giving ideas to the Swiss, who would like similar exceptions applied to their own relations with the 28 member bloc.
“You can regulate it but the impact on the ground might not feel so different,” Stephen Booth, the think tank’s other co-director, said.
Open Europe said Britain’s big challenges to improve its economic competitiveness had nothing to do with the EU. They included below-average standards in primary education, low levels of business investment and infrastructure delays.
During his campaign fro 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 PM 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: Referendum.
- July-December 2017: United Kingdom holds rotating EU Council Presidency.