Washington | Britain’s exit from the EU could send shock waves across the global economy and threaten more than a trillion dollars in investment and trade with the United States, a leading American newspaper reported Sunday.
The dangers of a British exit from the political and economic alliance that has united Europe for the past four decades carries hefty consequences for American businesses, which employ more than a million people in Britain, the Washington Post reported.
The United States is the largest single investor in Britain, and many firms consider it the gateway to free trade with the 28 nations that make up the European Union. A Brexit would jeopardise their access to those markets, potentially reducing revenue and forcing some firms to consider relocating their European operations elsewhere. That has put corporate America onto the front lines of the campaign to keep the union together, with several of Wall Street’s biggest names donating substantial sums to the effort.
A Brexit would be bad for the U.K., it would be bad for Europe, it would be bad for the world, including the United States, Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, said. You already have enough uncertainty in the world today. We don’t need more, the paper quoted Gurria as saying.
The International Monetary Fund on Friday issued one of the most dire forecasts to date, calling the impact of Britain’s departure from the EU negative and substantial. The fund predicted that a Brexit could reduce economic growth by up to 5.6 per cent over the next three years in its worst-case scenario. Those concerns were echoed by policymakers around the world last week.
In Washington, Federal Reserve Board Chair Janet Yellen said the threat of a Brexit factored into its decision to remain cautious and keep its benchmark interest rate unchanged last week. While financial markets would bear the brunt of the immediate impact of a Brexit, the referendum raises deeper questions for businesses on both sides of the Atlantic. If Britain votes to leave, it would spend at least two years working out the terms of its departure, with all signs pointing to an acrimonious negotiation. Britain would also need to procure trade agreements with countries around the world, including the US, a process that could take years. Businesses say the protracted debate would leave them stuck in limbo, the report said.
The US exported USD 56 billion worth of goods to Britain last year, but that number is dwarfed by the USD 588 billion in US investment there, in sectors ranging from banking to manufacturing to real estate. Likewise, Britain has plowed nearly half a trillion dollars into the US and employs more than a million workers here. Those deep ties mean that trouble on one side of the Atlantic easily can migrate to the other shore.