UK would face 'significant economic shock' after Brexit - independent thinktank

Posted On: 
11th May 2016

The value of the pound would nosedive while income tax would rise if the UK votes to leave the EU, an independent thinktank has warned.

NIESR has warned of the economic consequences of Brexit
Credit: 
PA Images

According to the National Institute for Economic and Social Research (NIESR), voting to leave the bloc would result in a “significant shock to the UK economy”.

It said export trade would be diminished “in all possible scenarios” if Britain broke ties with Brussels, and warned of a 30% drop in trade in the worst case scenario.

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Sterling would drop to the same level as the euro by 2030 – a fall of 20% - the NIESR said.

And it said capping migration at less than 100,000 entrants a year would require “an increase in the tax rate on labour income of about 2% to preserve budget balance”.

“The potential downside risks of a decision to leave, while not susceptible to precise quantification, appear large” said Jonathan Portes and Angus Armstrong of the NIESR.

“Risks are also attached to remaining in the EU, but appear easier to manage”.

Elsewhere a report by Economists for Brexit said free trade with the rest of the world would flourish after a vote to leave.

It said falling back on World Trade Organisation rules for international trade would see a 4% boost in growth.

Last month the Treasury claimed GDP could be between 3.4% and 9.5% lower by 2030 if Britain votes to leave the EU.

The OECD meanwhile said there would be a “Brexit tax” of between a 2.7% and 7.7% fall in GDP.