The pro-Brexit camp initially appeared to be holding two strong economic cards. The first was UK citizens’ overwhelming rejection of their country’s net fiscal transfer to the rest of the EU, which currently amounts to 0.4% of GDP. Since Prime Minister Margaret Thatcher first demanded to have “her money back” in 1979, the budgetary costs of EU membership have completely overshadowed its economic benefits in the public’s view.
The second card was the sorry state of continental Europe’s economy. In terms of GDP growth, employment, or innovation, other EU countries, on average, lag behind the UK (and, to an even greater extent, the United States). Whereas EU membership was once regarded as a gateway to prosperity, it is increasingly viewed as a drag on progress.
But lately, as John Van Reenen of the London School of Economics recently put it, the economic case for Brexit has been largely missing in action. Its advocates are at pains to explain what kind of trade and partnership agreements, if any, Britain could enter into with the EU, much less how those agreements would be superior to the current arrangement. As a result, it is tough to argue that the UK would receive a net economic boost – or even that it will not suffer considerably – by leaving the EU.
Of the eight economic evaluations recently surveyed by the Institute for Fiscal Studies, a respected independent research institution, only one claims that leaving the EU would lead to significant economic gains. And that study – produced, unsurprisingly, by Economists for Brexit – has been sharply criticized by the rest of the economic profession for lacking an appropriate analytical basis.
Most studies find that Britain would suffer significantly from leaving the EU. UK exporters would end up participating less in the large EU market, and they would be shut out of EU-negotiated agreements ensuring access to major international markets. While the UK could negotiate new agreements with these partners, that would take time, and, acting alone, its negotiating power would presumably be weaker.