The OECD has claimed that a second referendum that reverses Brexit would have a “significant” and “positive” impact on the economy of the United Kingdom, which is said to be on track to be crippled by its withdrawal from the European Union.
The most recent UK economic survey that was conducted by the think-tank is currently predicting economic growth of only 1 percent in 2018, stating that the uncertainty of Brexit negotiations may leave the United Kingdom without a free-trade agreement with the European Union by its official exit date in 2019.
It warned that the economic prospects of Britain could be further struck by a “disorderly Brexit” if negotiations between the European Union and the United Kingdom are cut short, prompting a sharp reaction by financial markets, leading the exchange rate to new lows and resulting to a downgrade in the sovereign rating of the United Kingdom.
“Business investment would seize up, and heightened price pressures would choke off private consumption. The current account deficit could be harder to finance, although its size would likely be reduced,” warned the report.
There are also risks that Northern Ireland and Scotland could vote to stay in the European Union, which would have a “major” effect on the national economy.
However, the Paris-based OECD has hinted that the United Kingdom could avoid those risks through a reversal of Brexit.
“In case Brexit gets reversed by political decision (change of majority, new referendum, etc.), the positive impact on growth would be significant,” said the report.
The OECD admitted that Brexit negotiations were tough to forecast, and could “prove more favourable” than what is assumed in its report – boosting investment, trade, and growth – but stressed that this would need “an ambitious EU-UK agreement and a transition period to allow for adjustment to the new agreement.”
“Meantime, however, uncertainty could hamper domestic and foreign investment more than projected and hurt consumption, even more, where the exchange rate to depreciate further,” added the OECD.
Brexit has compounded the call of restoring labour productivity growth, which the OECD stated had arrived to a “standstill” and made “no meaningful contribution” to the output of the United Kingdom since 2007.
The report emphasiezed that labour productivity was also most vulnerable outside of the South East of England and Greater London.
This type of disparity between workers and regions “may lead to, or be the result of, important differences among people in terms of income and wealth, jobs and earnings, and education and skills.”
“Well-being inequalities may have been one of the causes of Brexit, as less-educated workers in remote regions might have perceived to benefit less from the European project,” added the OECD.
The report put forward some recommendations to address job quality and productivity of low-skilled workers, including continuing devolution measures, investment in transport links within and between cities, restricting self-employment to independent entrepreneurs, additional training, and awarding zero-hours contract workers increased job security after three months.
Reacting to the OECD report, a spokesperson for the Treasury stated: “Increasing productivity is a key priority for this Government, so that we can build on our record employment levels and improve people’s quality of life.
“Today, the OECD has recognised the importance of our £23 billion National Productivity Investment Fund which will improve our country’s infrastructure, increase research and development and build more houses.
“In addition, our reforms to technical education and our ambitious Industrial Strategy will also help to deliver an economy that works for everyone.”