WASHINGTON, DC – On June 23, the United Kingdom will hold a referendum on whether to leave the European Union. On the economic side of the “Brexit” debate are three main questions: Do European rules impose growth-stifling regulation on the UK? Would leaving the EU increase opportunities for British exports? And what would be the likely impact of withdrawal on financial stability?
These are complex issues, but the June 2014 report by the Centre for European Reform (CER) provides a sensible guide on the first two questions. And now the Bank of England (BoE) has weighed in clearly on the third. In economic terms, the facts favor staying in the EU.
Heated and relatively technical debates of this nature require one to decide which experts to trust. The commission that prepared the CER report comprised sensible British and European economic thinkers and former policymakers with no illusions about how the EU really works. Likewise, the BoE’s Financial Policy Committee was designed after the 2008 crisis to speak truth to authority on where systemic risks really lurk – and what to do about them.
The CER report is strongest on the real (nonfinancial) economic issues. The most contentious point here is whether the British economy is held back in some way by red tape imposed by Brussels or by European treaty obligations.