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Leaving the European Union (EU) would trigger a recession and set economic growth back by 6% - or £106-billion (R2.3-trillion) by 2020, a report from the Economist Intelligence Unit revealed on Wednesday.
UK citisens will vote on its membership of the EU on June 23.
The report, 'Mapping the impact of Brexit', said the uncertainty caused by a “leave” vote would upset consumer and market sentiment, causing a 14% to 15% devaluation of the pound against the US dollar.
It would also delay investment and spending decisions, hitting real gross domestic product (GDP) growth most in 2017.
“London’s financial sector could experience a ‘brain drain’, as European nationals return home,” it added.
“This economic pain would be coupled with political instability, as significant doubts emerge about government cohesion,” the report explains. “The impact will be serious, and prolonged.
“With hiring decisions also deferred, we anticipate that the unemployment rate would climb in 2017, peaking at 6% in 2018,” it said. “This reflects about a 230 000 increase in the number of unemployed people compared with 2015, and is around 380 000 more than our baseline forecast for 2018.”
The report reveals what would happen to the following six sectors:
1. Financial services: “The UK financial services would lose access to its economic hinterland in Europe causing firms to shift away from London to ensure access to the single market.”
2. Retail: “UK retailers will face greater supply chain complexity and regulatory divergence as domestic sales slump while consumers wait on the outcome of negotiations.”
3. Automotive: “The UK is a sizeable market in its own right. In fact an EU exit may create opportunities for locally based carmakers. However, supply chains would experience disruption.”
4. Healthcare: “Pharmaceutical exports, access to medicines, and research grants could all be at risk if the UK leaves the EU. Any economic downturn would also affect NHS spending.”
5. Energy: “Regardless of Brexit the UK will need to remain intrinsically linked to the European energy market and the frameworks which govern it.”
6. Telecommunications: “Investment and revenue in the UK would only see a slight fall but uncertainty over the future of pan-European roaming charges could put consumers at risk.”