Keeping membership of the European Union’s single market could add almost two year’s worth of growth to Britain’s economy, according to a report.
A study by the Institute for Fiscal Studies (IFS) claims that membership of the single market could be worth a potential 4% of extra gross domestic product (GDP) to the UK compared with World Trade Organisation (WTO) membership alone.
The thinktank said the boost to the country’s trade, public finances, growth and living standards far outweigh the costs of single market membership across Europe.
Its report, which was funded by the Economic and Social Research Council, added that just having access rather than membership of the single market was “virtually meaningless”.
The IFS sent out some stark warnings over the impact of Brexit ahead of the EU referendum, saying it would lead to two more years of austerity.
Its earlier reports on Brexit said lower growth and extra borrowing of Brexit would knock a £20 billion to £40 billion hole in the Government’s finances by 2020.
In its latest study, the IFS warned Britain now faces some “very big choices” in negotiations with the EU.
Ian Mitchell, research associate at the IFS and an author of the report, said: “There is all the difference in the world between ‘access to’ and ‘membership of’ the single market.
“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.”
The report claims that while leaving the EU will free the UK from an estimated £8 billion a year of budget contributions, the loss of trade from Brexit could hit tax receipts by a larger amount.
It found new trade deals would be unlikely to make up for lost EU trade, which accounts for 44% of British exports and 39% of service exports.
Official figures from the Office for National Statistics on Tuesday showed the UK exported £12 billion worth of goods and services to the EU in June, an increase of £500 million compared with May.
The IFS said single market membership also removes trade barriers, such as licensing and other regulatory constraints, to supplying goods or services.