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22 June 2016

What is the OECD position on Brexit?

According to the Organisation for Economic Co-operation and Development, Brexit would be “a major negative shock to the UK economy”.

By New Statesman

The OECD (Organisation for Economic Co-operation and Development) has warned strongly against Brexit.

In its policy paper on the likely consequences of Britain leaving the EU, the OECD comes out firmly for remain, citing serious risks not only to the UK economy but to the rest of the OECD, especially European countries.

What are the dangers of Brexit that the OECD forsees?

According to OECD policy paper The Economic Consequences of Brexit: A Taxing Decision, leaving the EU “would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD, particularly other European countries. In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU.”

The OECD predicts that by 2020, UK GDP would be more than 3 percent lower under Brexit than if Britain remained within the EU, equivalent to a per-household cost of £2,200; by 2030, the OECD claims that the GDP shortfall would be over 5 per cent, equating to £3,200 per household.

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Will this affect voters? Polling by Ipsos Mori suggests not: two thirds of voters believe that their standard of living won’t be affected by Brexit. And worryingly for Remain, pro-EU voters were more likely to shift position in response to a threat to their standard of living, while Leave voters remained committed even when told they would personally lose out. Just 7 per cent of Leave supporters surveyed said they would vote Remain if Brexit left them £500 a year worse off.

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That means that subsequent Vote Leave attacks on the independence of the (partially EU-funded) OECD are possibly beside the point: Leave voters are unlikely to change their allegiance for financial reasons.

Nevertheless, reports from the UK Treasury, the LSE’s Centre for Economic Performance and the Confederation of British Industries have all reached similar conclusions on the economic consequences of Brexit.