There’s a consensus view that Britain voting to leave the EU would lead to years of protracted trade negotiations with European countries to manage the exit.
Analysts from Morgan Stanley, led by Jacob Nell, think this might be too optimistic.
In a huge research note, they put forward the case for a “disorderly and costly exit,” that could see the UK booted out of the EU without so much as farewell chat within two years of the vote.
They put forward three reasons as to why that might happen, here they are (emphasis ours):
- First, the remaining EU members may not want to make exit too painless, since they may be worried that the easy availability of an exit could encourage others to leave, and threaten the Union.
- Second, the economic interest in maintaining trade with the UK is not overwhelming: the UK accounts for less than 5% of exports for 13 out of 27 EU members.
- Third, unanimity is required to extend the two year negotiating period. We think that the duration of similar complex trade negotiations means that it is unlikely to be complete in two years. As a result any member state could force a hard exit -a sudden reversion to a WTO relationship with the EU – by refusing to extend the negotiating period if they considered that a preferable outcome.
Morgan Stanley aren’t keen on the idea of a Brexit, saying it could knock 1.3% off GDP growth in the year after the referendum, and see a fall in the FTSE 100 of up to 20%.
According to the polls, it’s really too close to call how Britain will vote in the referendum, which could happen as late as 2018.
Voting intentions have fluctuated wildly, but at the moment the polls are about as useful as a coin toss.
Here’s the graph from Morgan Stanley:
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