A leading economist arguing for Britain’s exit from the EU has been forced to disown comments made by his own consultancy which warn that Brexit could trigger ‘full-scale capital flight’ from the UK.
Roger Bootle, one of eight self-styled Economists for Brexit, said he had not seen a note to clients last week which predicted a Leave vote could have dire consequences.
The note, which is described as having been jointly edited by Bootle, said: ‘A risk is that an EU exit would trigger a current account crisis and full-scale capital flight.’
A leading economist arguing for Britain’s exit from the EU has been forced to disown comments made by his own consultancy which warn that Brexit could trigger ‘full-scale capital flight’ from the UK
It forecasts that a firm vote to leave the EU would cause a short-term hit to the economy ‘at the top end of our estimated range of 1 per cent to 2 per cent’.
However, Bootle said this weekend that he had not seen the document before publication. ‘I wouldn’t have chosen those words,’ he said, adding that talk of capital flight is ‘a bit strong’.
Britain is already running a huge current account deficit, a measure of trade and investments with the rest of the world.
Foreign investors financing the deficit could withdraw their support – leading to a collapse in sterling – if they lost confidence in Britain’s ability to repay debt.
The note also declares that a vote to remain would see ‘the economy bouncing back’, with growth hitting 2.7 per cent next year from the current rate of 2.2 per cent.
Roger Bootle is one of eight self-styled Economists for Brexit
Bootle said: ‘As there’s already uncertainty, that’s probably right and not very controversial. I don’t think the choice of words is very good.’
He stressed that he had a personal position on the referendum and the firm had an independent view.
The note will nevertheless be hugely embarrassing for the Leave campaign, which has poured scorn on economists and institutions for arguing that departure would cause huge economic damage. Brexit campaigners have accused such experts of being in the pay of the EU.
The Capital Economics note outlines two possible scenarios. If the UK remains within the European Economic Area and introduces no restrictions on freedom of movement then it expects a 15 per cent drop in sterling against the dollar.
In the event of a firm vote to leave – involving a full-scale switch to World Trade Organization rules and a new immigration system based on points – Capital Economics said the short-term uncertainty would ‘hit hard’.
The note stated: ‘Markets would expect the Monetary Policy Committee to cut interest rates and launch further QE, driving sterling and gilt yields even lower. But there would also be a possibility of full-scale capital flight.’
However, Bootle said he was not convinced there would be a huge blow to confidence in the event of a Leave vote.
But he conceded that ‘the positives would come mainly later’ and that it might be between two and five years before Britain sees the economic benefit of leaving the EU.
Both the Vote Leave and Stronger In campaigns declined to comment.