A vote to leave the EU on June 23rd would trigger recession and set real GDP back by 6% by 2020, according to The Economist Intelligence Unit's "Out and down: Mapping the impact of Brexit." The report, which explores a post-Brexit landscape also looks at the impact on industrial sectors, ranging from financial services to healthcare.
"Whilst some of the 'Remain' campaign claims may seem alarmist, the fact is that a vote to leave would have a negative political and economic impact," said Danielle Haralambous, the UK analyst for The Economist Intelligence Unit who helped compile the report.
"The negotiation process would create a period of uncertainty, both for consumers and investors, sterling would weaken and prices would rise, especially as trading with European counterparts became more complex."
From an economic perspective the uncertainty caused by a "Leave" vote would upset consumer and market sentiment, causing a 14-15% devaluation of the pound against the US dollar in 2016.
Delayed investment and spending decisions would hit real GDP growth most in 2017. Weaker trade ties would exacerbate this decline from 2018 onwards, meaning that, in real terms, the UK economy would be 6%—or £106bn—worse off in 2020 were it to leave the EU rather than stay in.
The impact on specific UK industries would vary by sector but would be largely negative with some sectors finding themselves more insulated than others.
The UK's financial sector would be particularly exposed to the loss of key continental markets. Domestic and foreign financial services companies may opt to move their operations elsewhere to ensure access to the single market. Meanwhile, London's financial sector could experience a "brain drain" as European nationals return home.
Retail would also suffer as companies struggle with complex supply chains and divergent regulation against a backdrop of consumer uncertainty that would depress sales volumes by 3% next year.
Other sector-level impacts
In the automotive industry, an EU exit could create opportunities for UK-based carmakers, but supply chains would experience disruption and sales would fall in line with the economy.
Pharmaceutical exports, access to medicines, and research grants could all be at risk. Any economic downturn would also affect NHS funding.
The UK energy sector will need to remain intrinsically linked to the European energy market and the frameworks that govern it, regardless of a vote to leave or remain.
Telecommunications investment and revenue would only see a slight fall, but access to the Digital Single Market and uncertainty over the future of pan-European roaming charges would lead to missed opportunities.