Continent Cut Off? The Macroeconomic Impact of British Withdrawal from the EU

This paper makes two main points. First, British trade with the rest of the EU is an important source of UK employment. Around 2.7 million jobs in the UK are directly associated with the production of goods and services currently exported to the EU. Another 0.5 million jobs are connected to the domestic and non-EU sales of large global companies who are located in the UK primarily to export to the EU market. Second, UK living standards would be adversely affected by withdrawal from the EU. Most of the jobs we have identified would not be lost if the UK were to withdraw from the EU. Widespread job losses are unlikely since real wages would adjust to changes in the demand for labour in a market economy such as the UK, and monetary policy could be relaxed to offset any deflationary shock. Our assessment is that the level of UK output would be about 2 per cent lower outside the EU than inside. Household consumption would be lower by 2½ per cent. These estimates are fairly uncertain, but they are broadly equivalent to the gains that most EU economies are estimated to have made from the Single Market Programme.

This report was subsequently published as "The macroeconomic impact of UK withdrawal from the EU"