Brexit – what would happen if Britain left the EU?
Growth, trade, immigration, jobs, diplomacy: what would the impact be if a 2017 referendum pushed UK towards the exit?
David Cameron's electoral triumph has brought the prospect of a British withdrawal from the EU one step closer. The prime minister has vowed to reshape Britain's ties with Europe before putting EU membership to a vote by 2017.
But what would "Brexit" - a British exit from the 28-nation EU - look like? Eurosceptics argue that withdrawal would reverse immigration, save the taxpayer billions and free Britain from an economic burden. Europhiles counter that it would lead to deep economic uncertainty and cost thousands, possibly even millions, of jobs.
Our current assessment is that leaving the EU would be likely to impose substantial costs on the UK economy and would be a very risky gamble.
On the one hand, UK GDP could be 2.2% lower in 2030 if Britain leaves the EU and fails to strike a deal with the EU or reverts into protectionism. In a best-case scenario, under which the UK manages to enter into liberal trade arrangements with the EU and the rest of the world, while pursuing large-scale deregulation at home, Britain could be better off by 1.6% of GDP in 2030.
These are not the sort of sums on which the fate of great nations depends - nor on which momentous decisions about EU membership should be made.
The UK is roughly 11.5% of GDP - about 185bn a year - worse off because it is a member of the EU instead of being a fully independent sovereign nation.
The attractiveness of the UK as a place to invest and do automotive business is clearly underpinned by the UK's influential membership of the EU.
Our research clearly shows that leaving the EU would seriously damage economic growth and jobs in the UK. But the EU can and must be improved. It must not interfere in things which it does not need to do and it must make a better job of doing the things it has to do. We need to continue saying this loudly and clearly. London is Europe's financial centre so there is a strong national interest in getting this right.
Politicians who continue to claim that 3m jobs are linked to our EU membership should be publicly challenged over misuse of this assertion. Jobs are associated with trade, not membership of a political union, and there is little evidence to suggest that trade would substantially fall between British businesses and European consumers in the event the UK was outside the EU.
It would adapt quickly to changed relationships with the EU. Prior to the financial crisis, the UK saw on average 4m jobs created and 3.7m jobs lost each year - showing how common substantial churn of jobs is at any given time. The annual creation and destruction of jobs is almost exactly the same scale as the estimated 3-4m jobs that are associated with exports to the EU.
It would place the UK in the same position as the US is currently in, along with Indian, China and Japan, all of which manage to export to the EU relatively easily.
Although the years immediately surrounding the exit are likely to feature some degree of market uncertainty, if the right measures are taken the UK can be confident of a healthy long-term economic outlook outside the EU.
There are a number of free trade agreements currently being negotiated by the EU, including with the US and Japan. The UK with 65 million consumers would not have anywhere near the negotiating power that the EU with its 500 million consumers would have.
While we could negotiate trade deals with the rest of the world, we'd have to agree deals with over 50 countries from scratch just to get back to where we are now, and to do so with the clout of a market of 60 million, not 500.
The general rule is that if a country like Britain were to cherrypick and discriminate against individual EU member states, the EU would at least threaten to retaliate.
The idea [the UK] could have influence in the world outside the EU is risible. Its power and effectiveness is from being a strong leader in Europe.
I think from China's point of view we don't think that the UK, or France or Germany or any single European countries can play a global role. But the EU is different. It is the biggest market, and China's biggest trade partner. The EU is seen as a major power in the world. If the UK left, it would hurt the UK much more than the EU.
We have always been more comfortable dealing with countries individually than as part of a club. We don't see the UK as part of the EU, but as a distinct identity because of its history and the Indian diaspora. So it plays a different role in the Indian psyche, a unique case. It is not always positive but it is always distinct. And some of the most strategic elements in foreign policy cannot be conducted through a club like the EU, but as part of a bilateral relationship.
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