HM Treasury analysis: the long-term economic impact of EU membership and the alternatives

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Series Details 9250
Publication Date April 2016
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An analysis of the long-term economic impact of EU membership and the alternatives was published by HM Treasury (Finance Ministry of the United Kingdom) on the 18 April 2016.

The analysis assessed continued UK membership of the EU against the three existing alternative models:

+ membership of the European Economic Area (EEA), like Norway
+ a negotiated bilateral agreement, such as that between the EU and Switzerland, Turkey or Canada
+ World Trade Organisation (WTO) membership without any form of specific agreement with the EU, like Russia or Brazil

The Treasury’s analysis showed that the UK would be permanently poorer if it left the EU and adopted any of these models. Productivity and GDP per person would be lower in all these alternative scenarios, as the costs would substantially outweigh any potential benefit of leaving the EU. The analysis found that the annual loss of GDP per household under the three alternatives after 15 years would be:

+ £2,600 in the case of EEA membership
+ £4,300 in the case of a negotiated bilateral agreement
+ £5,200 in the case of WTO membership

The negative impact on GDP would also result in substantially weaker tax receipts, significantly outweighing any potential gain from reduced financial contributions to the EU. After 15 years, even with savings from reduced contributions to the EU, receipts would be £20 billion a year lower in the central estimate of the EEA, £36 billion a year lower for the negotiated bilateral agreement and £45 billion a year lower for the WTO alternative.

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