Brexit debate

Food industry ‘blighted until 2020’ if Brexit wins vote

By Michelle Perrett

- Last updated on GMT

A vote to quit the EU could blight the British economy until 2020, claimed the new report
A vote to quit the EU could blight the British economy until 2020, claimed the new report

Related tags: United kingdom

The UK economy – including its largest manufacturing sector, food and drink – will be blighted until 2020 if the country votes for Brexit, claimed The Economist Intelligence Unit.

The research and analysis group’s report, ‘Out and down: Mapping the impact of Brexit’​, warned of the far reaching consequence that exit from the EU could have on the country.

The report said: “The economic pain would be coupled with political instability, as significant doubts merge about government cohesion. The impact will be serious and prolonged.

“A vote to leave the EU would trigger a political and constitutional crisis with immediate and lasting impact.”

It predicted that it would be an event of “immense force”​ ,which would see Prime Minister David Cameron’s authority “shattered”.

The report said it would expect a “mood of palpable crisis to prevail, with the Conservative Party in something close to meltdown.”

‘Mood of palpable crisis’

The economy would also be “plunged into uncertainty​” with tumultuous financial market volatility.

Retail figures would fall by 3% during 2017 putting them lower than 2015.

It predicted that the uncertainty of the economic costs of a vote to leave would lead to a sharp sell-off in UK assets and a depreciation of the pound.

The currency effect would be most pronounced in the weeks after the vote. But, on a full-year basis, our projections assume that a vote for Brexit would mean the average value of pound against the euro and the US dollar in 2016 would be 14-15% lower than in 2015,” ​the report said.

While it expected that negotiations with the EU would be hammered out in 2017-18, the economy would continue to suffer. It said that rising import costs would start to show at this time.

Profit margins would also be squeezed, which had the potential to lead to job cuts.

By 2019-20, it suggested that the UK government would seek to conclude negotiations with the EU.

‘Prohibitive barriers to trade’

“We assume that the UK would gain restrictions on free movement of labour and smaller contributions to the EU budget while retaining access to the EU’s market for goods, not face new and prohibitive barriers to trade in services,” ​it said.

There will be further shocks for the supply chain, which would affect the food and drink sector.

“The supply chain and agreements that have evolved on an even playing field with partners in the EU will need to be revisited as the goal posts begin to move,”​ it said.  

“Regulatory requirements related to safety, quality and consumer protection that are currently consistent across member states will diverge.”

It also said that opting out of the Common Agricultural Policy would affect supply chains for British Farmers.

The EU Referendum takes place on Thursday June 23.

The Economist Intelligence Unit’s Brexit report – at a glance

  • The shock a Brexit would give to the economy would lead retail sales to fall by 3% in 2017
  • By 2020, nominal retail sales will be 6% lower than if the UK votes to remain in EU
  • Brexit would lead to unemployment peak in 2018, with a  projected rise of 350,000
  • Gross Domestic Product would fall by 6% if the UK were to exit the EU
  • Leaving the EU would spark a political and constitutional crisis

Related topics: Prepared foods, Policy

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