UK households could be hit with an annual £2,200 “Brexit tax” by 2020 if the British electorate votes to leave the European Union this June, according to figures released by the OECD today.
By 2030 this would increase to £3,200 and up to £5,000 in the most pessimistic case.
The OECD report, the Economic Consequences of Brexit: A Taxing Decision, warned that while it is difficult to forecast precise costs there appears to be no economic upside for the UK under Brexit whatsoever.
The OECD analysis supports figures released by the UK Treasury, the Confederation of British Industries, and the LSE’s Centre for Economic Performance, which all forecast the UK would be economically worse off under Brexit.
OECD general secretary Angel Gurria told an audience at LSE this morning that the first payments of the Brexit tax were already being made with GDP growth falling to 0.4 per cent for Q1 announced just this morning, as well as the weakening sterling and weak business investment.
“Unlike most taxes, however, this one will not finance the provision of public services or close the fiscal gap,” Gurria said. “The “Brexit tax” would be a pure deadweight loss, a cost incurred with no economic benefit.”
Gurria warned that Brexit would not just mean giving up access to the EU single market, but also 53 more third-country trading agreements, which it would have to renegotiate from scratch.
“The first priority would be to negotiate with the rest of the European Union, which accounts for nearly half of UK exports. Facing an embittered, freshly-rejected and much larger partner with an incentive to make exit costly, is not a good basis for a favourable outcome.”
Gurria also referred to comments made by President Barrack Obama last week that the UK would “not be exactly their top priority for negotiating trade deals or granting generous trade concessions”.
Gurria pointed to the appeal to foreign investors of the UK’s access to the single market.
“Less investment, reduced flows of goods and people, costlier credit and lower exposure to ideas and skills across borders would ultimately undermine productivity and the long-run economic capacity of the UK economy,” Gurria stated.