POLITICS

'Brexit' From The EU Could Cost Britain's Economy £225 Billion, Warns German Think-Tank

27/04/2015 18:21 BST | Updated 27/04/2015 18:59 BST

Britain's exit from the European Union could hit the economy to the tune of £225 billion by 2030. That's the warning by German think-tank Bertelsmann Stiftung ahead of the election in which David Cameron has promised to hold a referendum on the country's continued membership of the EU. The report claims the British exit -- or "Brexit" -- would hurt all 28 member-states, but would hit the UK hardest, with damage to the economy outweighing savings from contributions to Brussels budgets.

It concludes that quitting the EU following a referendum would have "long-term negative consequences" for the UK's economy, which would be between 0.6% and 3% smaller after 12 years outside than it could expect to be if it remained a member -- the equivalent of up to 313 billion euros (£224 billion) at current prices.

In a best-case scenario, in which Britain has a trade agreement with the EU similar to that of Switzerland, Brexit would cost every UK citizen the equivalent of 220 euros (£157) a year at current prices by 2030, said the think-tank. But the least favourable outcome, in which the UK loses all trade privileges and agreements, would see losses equivalent to 4,850 euros (£3,470) per head by that date.

Meanwhile, the report warned that Brexit would reduce the EU's potential GDP by up to 0.36% and the world's GDP by up to 0.25% by 2030. Ireland would be almost as hard-hit as the UK, said the report, losing 0.82% of potential 2030 GDP under the "soft exit" scenario and 2.66% if the UK suffers trade isolation. Belgium stands to lose up to 0.96% of GDP, Luxembourg up to 0.8%, Germany up to 0.33% and France up to 0.27%, it said.

Bertelsmann Stiftung chairman and chief executive Aart De Geus said: "A Brexit is a losing game for everyone in Europe from an economic perspective alone - particularly for the UK. But aside from the economic consequences, it would be an especially bitter setback for European integration as well as Europe's role in the world. Setting the course for a Brexit in the House of Commons elections would weaken the Union."

The report, based on figures from Munich's Ifo Institute, found that exiting the EU would increase the costs of trade between the UK and its European neighbours and reduce trade.

"The severity of the impact will differ for individual British industries," said the report. "For the important area of financial services, anticipated losses in added value reach around 5% in the unfavourable scenario. The chemicals, mechanical engineering and automotive industries will see steep losses in added value because they are heavily incorporated in European value chains. The chemicals industry will face the greatest drop - nearly 11%."

Matthew Elliott, chief executive of pro-reform pressure group Business for Britain, said: "This report imagines a world where every negative and false assumption held by those in favour of remaining in the EU at all costs is true, and then gives this absurd doomsday scenario a cost in terms of GDP."

He continued: "The end result is that this six-page report is simply not credible, is inaccurate in a number of places and certainly does not help an informed debate about the future of our relationship with the EU. The EU desperately needs an overhaul and Britain wants a new, looser economic relationship with it; none of which are possible without a renegotiation backed by a referendum."

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