It is just fear mongering or will a potential Brexit do untold damage to the U.K. economy? That is the question Britons have to ask themselves as they prepare for their June 23 referendum on whether or not to leave the European Union. In the mean team the rest of the world sits on pins and needles waiting to see of the potential fall out of a Brexit will send shock waves through the global economy. The concept of fear mongering is interesting and I bring it up after reading an interesting article from the Guardian. Tuesday, PWC released a report, commissioned by the CBI, a UK business lobby group, that warns that a Brexit could lead to the loss 950,000 jobs and reduce household income by up to £3,700. Interestingly, the PWC report isn’t the only group to highlight these grave risks. I recently wrote about a report from the Organization of Economic Development and Cooperation, which estimated that household incomes could fall by £2,200 by 2020. The London of School of Economics also said that they would expect UK GDP to 3.1% of potential growth as UK exporters would suffer from trade restrictions with the European Union. However, in a recent interview Patrick Minford, professor of applied economics at Cardiff Business School, and an economist for the “leave” camp says the data is skewed to scare people and he could be right. A famous quote keeps running through my head: there are lies, damned lies and statistics. People can use numbers to support whatever view they have. He admitted that exporters would have a difficult time in the UK but consumers would see a major benefit as the country removed all its trade barriers, making imports a lot cheaper. This is an interesting idea but the more I think about it, the more unrealistic is sounds. Basically Minford is arguing that consumer demand will make up for a weaker export sector. The only problem that Minford doesn’t mention is that the manufacturing jobs have some of the highest wages. As the export sector weakens because of trade barriers with the EU, more people will be laid off. Now will households lose up to £3,700 in income, I think only time will tell but to assume there won’t be any economic consequences of leaving the EU seems a little bit naïve to me.
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