Prof Ferguson quotes research from the London School of Economics that estimates Brexit could reduce foreign direct investment in the UK by 22% and real income by 3.4%. He also mentions a Nomura study, which predicts a rapid decline of sterling.
The problem with these forecasts is that they are entirely speculative. In practice, nobody knows how a British withdrawal would play out. An event like this has never happened before. There is no historic precedent for Brexit.
Thus it is entirely possible that EU members realise that it would not be in their best interests to cut off Europe’s second-largest economy from its market. In which case Britain would retain access to the Common Market and gain the freedom to run its own affairs. Who knows, if Brexit works in Britain’s favour, we might then in the future start talking about Frexit, Gerxit or Denxit, too.
Crucially, a British withdrawal from the emerging EU superstate would be a strong move toward a more competitive Europe. It would be a Europe returning to the strengths of its diversity.
As long as this Europe still kept its borders open to movements of goods, services, capital and people, this would not be the worst outcome. This would be a free-trading Europe without any of the EU superstructures.
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