OECD warns of heightened uncertainty over Brexit

The Organisation for Economic Co-operation and Development (OECD), an influential international think tank, has weighed into the Brexit debate.

Its secretary general, Angel Gurria, said that Britain’s exit from the EU would lead to “heightened economic uncertainty, with damaging consequences”.

The OECD’s report, ‘The economic consequences of Brexit’, goes on to say that if the UK does vote to leave on June 23, the result would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD, particularly other European countries.

In the near term, the UK economy would be hit by tighter financial conditions and weaker confidence and, after a formal exit from the EU, higher trade barriers and an early impact of restrictions on labour mobility, the OECD says.

The organisation even quantifies the impact a Brexit would have on the UK economy, forecasting that by 2020, its GDP would be over 3% smaller than with continued EU membership, equivalent to a cost per household of £2,200 (€2,851). By 2030, the OECD says that the UK’s GDP would have shrunk by 5%.

This is the latest heavyweight organisation to add its view on the UK referendum, after a declaration at a recent G7 meeting in Japan said a Brexit would be a “serious risk to growth”.

However, not everyone is convinced that a Brexit is necessarily bad news for the UK. A report by Capital Economics for Woodford Investment Management states: “A European Union exit would enable the United Kingdom to broker trade deals with emerging markets that could pay dividends for the financial services sector in the long run.”

Read Funds Europe’s article on the implications of a Brexit for fund managers here.

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