Britons gets to vote on whether the country should stay in or leave the European Union on June 23 this year and HSBC made it very clear in its research note on Wednesday that the economic fallout could be huge.
In the note, Simon Wells and his team at HSBC point out that the very element pushing Eurosceptics to vote for “leave” — immigration — is the very component that the economy needs in order to grow.
If Britain leaves the EU, it won’t need to adhere to the Freedom of Movement Act, which allows all EU citizens to easily migrate to any other member state. It also means the UK doesn’t have to abide by Brussels imposed quotas over refugees.
However, while HSBC outlines how the economic fallout from curbing immigration could hurt the UK, it does point out that some negative impacts could be “offset” by Britain being allowed to “cherry pick” the type of immigrants coming in since it has the power to do so (emphasis ours):
If the UK were to vote to leave the EU, we assume there would be no efforts to deport EU migrants already in the UK. But some might leave voluntarily if they perceived the UK to be less welcoming. And inflows thereafter could be restricted. Therefore labour supply could shrink in the event of a Brexit.
Businesses without significant pricing power could suffer. Sectors with a large proportion of non-British EU workers — notably food manufacturers, leisure, facilities maintenance (eg cleaning and security) and construction — would likely be hardest hit.
Lower immigration could have adverse long-term economic implications too. Immigration helps drive the nominal GDP growth the Chancellor is relying on to close the budget deficit.
Over time, these downsides could be offset if the UK could ‘cherry pick’ immigrants from all over the world, who might better meet the needs of the UK labour market and raise productivity. For a given number of immigrants, Brexit might enable the quality of the inflow to rise.
Net inward migration in Britain was 336,000 in the year to June 2015, says HSBC and of which 180,000 came from the EU.
While Europe is experiencing the worst refugee crisis since World War II, EU nationals actually make up a huge influx to Britain’s inward migration levels.
HSBC pointed out that there were around 3.2 million non-UK nationals working in Britain in the third quarter last year — Just under 2 million of those were EU nationals.
Last week, in a note entitled “The UK & EU: Exit Emergency”, Barbara Boettcher and her team at Deutsche Bank pointed out that being part of the 28 nation bloc is largely to blame for the rise in migration to the UK.
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