Brexit Could Tip British Economy into Recession, Treasury Says

The treasury said the economy would likely experience “a profound shock” in the event Britons vote to leave the EU, which “would result in a marked deterioration in economic prosperity and security.”

Uncertainty over Britain’s post-EU trading relationships could delay spending and investment, while doubts about the economy’s prospects could raise borrowing costs for households and businesses, according to the treasury analysis.

In a joint speech alongside British Prime Minister David Cameron to present the analysis, Treasury chief George Osborne said sterling could weaken by between 12% and 15% if Britain left the EU, and within a year of the referendum inflation would be over 2% higher.

“Within two years the size of our economy—our GDP—would be at least 3% smaller as a result of leaving the EU—and it could be as much as 6% smaller,” Mr. Osborne told gathered workers at an office of a home improvements company. “We’d have a year of negative growth—that’s a recession.”

The Treasury said its analysis also showed that within two years of a vote to leave the EU, between 500,000 and 820,000 jobs would be lost, and average wages 2.8% lower and public borrowing as much as 24 billion pounds ($34.74 billion) higher than if Britain voted to stay.

In opening remarks, Cameron said voting to leave the EU would result for in the first recession,” brought on ourselves.”

“It would be like surviving a fall and running straight back to the cliff edge—it is the self-destruct option,” he said, the Wall Street Journal reported.

Such analyses are hotly disputed by advocates of a British exit from the EU. They say that any disruption after a vote to leave would be short-lived and that Britain would ultimately be better off outside the EU, where it would be free of burdensome EU regulation and could pursue its own trade deals with faster-growing parts of the world.