LONDON: September 19, 2016. According to the Centre for European Reform (CER), a respected nonprofit think-tank, replacing EU single market membership with a bilateral trade agreement will cost Britain between 0.75 and 3.0 percent of GDP.
According to the World Bank, the UK's GDP last year was US$2.84 trillion in current dollars, so the Brexit cost could range from US$21 billion to US$84 billion.
The CER notes that Brexit "is not an event but a process of disintegration. As long as there is no sudden crisis, Brexit voters will believe that its absence justifies their decision".
John Springford, a senior Research Fellow at the CER, said he expects a single market exit will be costly for British firms with their comparative advantage in high-value added services that rely on single market principles of non-discrimination and freedom of establishment.
He noted any new free trade agreement that includes UK-EU institutions to enforce regulatory equivalence will look "remarkably like" the Swiss deal with the EU, in which joint committees ensure that Swiss legislation accords with EU law.
However the Swiss arrangement only provides access for goods with the service sector largely excluded. "And for that, the Swiss have been forced to accept the free movement of people," he noted.
The CER thinks the EU is unlikely to give Britain better access than Switzerland to its goods and services markets without an agreement on free movement or EU budget contributions.
This week UK prime minister Theresa May said the British people "do not want free movement to continue as it has in the past".
The CER thinks the long-term economic consequences of the Brexit vote are very likely to be negative – but they won't manifest in a slower rate of growth before barriers to trade, investment and migration have risen, which it says may be in 2019.
"And without acute economic pain that is clearly attributable to Brexit, Britain's politicians will find it impossible to defy the electorate's demand to 'take back control', whatever the chronic damage to the economy," added Springford.
The CER says it is pro-European but admits in "many respects" the EU doesn't work well.