EU single market membership worth 4 pct to British GDP -think tank
Aug 10 Maintaining membership of the
European Union’s single market when Britain leaves the bloc
could be worth 4 percent to the size of the UK economy, a
leading economic think tank said in a report on Wednesday.
Britain is yet to begin formal talks with the EU about its
future relationship but retaining access to the single market,
particularly for financial services, will be a key part of the
EU leaders have insisted that full access to the single
market must be accompanied by the right for EU citizens to live
and work in Britain, a step too far for many Brexit backers.
Compared to World Trade Organisation (WTO) membership alone,
maintaining single market membership as part of the European
Economic Area could be worth 4 percent on GDP, the Institute for
Fiscal Studies estimated.
“From an economic point of view we still face some very big
choices indeed in terms of our future relationship with the EU.
There is all the difference in the world between ‘access to’ and
‘membership of’ the single market,” said Ian Mitchell, IFS
research associate and author of the report.
“Membership is likely to offer significant economic benefits
particularly for trade in services. But outside the EU, single
market membership also comes at the cost of accepting future
regulations designed in the EU without UK input. This may be
seriously problematic for some parts of the financial services
Single market access is “virtually meaningless as a
concept”, the IFS said, as any WTO country has access to the EU
for exports. Membership however involves reducing non-tariff
barriers, such as regulatory constraints, in a way that no
existing trade deal or customs union does, it said.
Finance minister Philip Hammond said last month that Britain
would come out of the single market as a result of its June 23
vote to leave the EU, but added that it must ensure single
market access for its financial services industry.
Some lawyers in the City of London have said banks could
access the single market by demonstrating to Brussels they
comply with rules that are “equivalent” to those in the EU, but
critics say granting equivalence is in the hands of the EU.
Financial lobby groups have also begun arguing that access
is a two-way street and that big companies on the continent
would find it difficult in the short to medium term not to have
access to the UK’s financial services sector.
The IFS said that without the so-called passporting that
comes with single market membership and allows financial
services firms in London to do business in Europe, a substantial
portion of EU-related activity would consider moving elsewhere.
“Anything short of actually being in the single market would
mean that passporting was forgone, and these firms would be
likely to need an EU-based subsidiary to service EU customers,”
the report said.
“Without membership … the UK would be likely to lose
high-value economic activity and jobs.”
On Wednesday, the chief executive of M&G, the British asset
management arm of insurer Prudential, said Dublin and
Luxembourg were alternative options for domiciling funds.
(Additional reporting by Huw Jones; editing by Stephen Addison)