Brexit could shrink UK economy by six percent: Treasury

Report says Brexit would cause 'permanent' economic damage

LONDON: If Britain leaves the European Union its economy could be six percentage points smaller than it would otherwise have been by 2030, the finance ministry warned in a report on Monday that was dismissed as scaremongering by eurosceptics.

The report said a Brexit would cause "permanent" economic damage as Britain would never be able to negotiate quota-free, no-tariff access to the single market if Britons vote to leave in a June referendum.



"The conclusion is clear: for Britain's economy and for families, leaving the EU would be the most extraordinary self-inflicted wound," Chancellor of the Exchequer George Osborne wrote in The Times.

"There would be less trade, less investment and less business... Leave the EU, and the facts are: Britain would be permanently poorer," he said.

Under all the Brexit scenarios examined, Britain would have a "less open and interconnected economy".

"It's a complete fantasy to suppose that there is some radically different other arrangement that Britain could negotiate, where we have access to the single market but don't accept any costs or obligations of EU membership," Osborne wrote.



The six percent drop forecast was based on the assumption that in the event Britain left the bloc, it would negotiate a trade deal similar to the EU-Canada pact, according to extracts from the report.

The agreement with Canada will remove most duties between the EU and Canada by 2023 and allow EU companies to bid for public contracts in Canada.

The UK Treasury's 200-page report has been months in the making and is the latest stark warning from the government ahead of the June 23 referendum.

The polls show the two camps neck and neck, while around a fifth of voters remain undecided.

The run-up to the referendum is being closely watched across Europe and beyond because of its potentially far-reaching economic and political consequences.



The Treasury report is being published just days before US President Barack Obama is due in London on a visit in which he is expected to underline the importance of Britain staying in the EU.

The world's G20 top economies last week warned that one of the risks to the global economy was "the shock of a potential UK exit from the European Union".

International Monetary Fund chief Christine Lagarde also called on Britain and the EU to save a "long marriage".

The IMF last week downgraded its forecast for British economic growth by 0.3 percentage points to 1.9 percent for 2016, although it held its 2017 forecast at 2.2 percent.

Charismatic London mayor Boris Johnson, who is campaigning for Britain to leave the EU, wrote in the Daily Telegraph that the vote was on a "knife-edge".

"All the usual suspects are out there, trying to confuse the British public and to persuade them that they must accept the accelerating loss of democratic self-government as the price of economic prosperity," he said.

John Redwood, a pro-Brexit lawmaker and former government minister, dismissed the Treasury analysis, comparing it to arguments made in favour of staying in the EU's Exchange Rate Mechanism.

"The remainers were wrong then and they are wrong now -- people should not trust their judgement on the EU," Redwood said.