Member Article

Brexit could cost UK economy £100 billion and 950,000 jobs by 2020, report shows

CBI Director-General, Carolyn Fairbairn, will today warn that leaving the EU would cause a serious shock to the UK economy, with a potential cost to UK GDP of £100 billion and 950,000 jobs by 2020 and negative echoes that could last many years after that.

In an economics lecture at the London Business School the CBI will analyse the potential impact of the UK leaving the EU - on trade, investment, jobs and growth.

To quantify the impact on the economy, the CBI commissioned professional services firm PwC to examine two different exit scenarios: one at the optimistic end of the range, and the other recognising the likelihood of difficult trade negotiations but nonetheless with trade deals being concluded. Both scenarios use moderate assumptions – significantly more pessimistic cases could be constructed.

Under both PwC scenarios, UK living standards, GDP and employment are significantly reduced compared with staying. The analysis indicates a cost to the British economy of leaving of as much as £100 billion – the equivalent of around 5% of GDP - by 2020.

Even in a scenario where a Free Trade Agreement with the EU is secured rapidly, the analysis indicates GDP could be 3% lower by 2020. GDP per household in 2020 could be between £2100 and £3700 lower, and the UK’s unemployment rate between 2 and 3 percentage points higher, than if the UK had remained in the EU. GDP growth in the years 2017-2020 could be seriously reduced – and possibly be as low as zero in 2017 or 2018.

Richard Butler, CBI West Midlands Director, explained why leaving the European Union would be a real blow for living standards, jobs and growth.

Richard said: “The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment. Even in the best case this would cause a serious shock to the UK economy.

“By 2020, the overall cost to the economy could be as much as £100 billion and 950,000 jobs. Household income in 2020 could be up to £3700 lower than it would otherwise have been. The economy would slowly recover over time, but never quite tracks back to where it would have been. Leaving the EU would mean a smaller economy in 2030.

“The findings from PwC’s independent study also explain why the majority of UK businesses are in favour of remaining within the European Union. Even under optimistic assumptions, an exit triggers serious economic disruption.”