As the June referendum on Britain's membership in the EU nears, Her Majesty's Treasury has put numbers on the long-term impact of "Brexit​," adding some heft to the arguments deployed by Prime Minister David Cameron and others in the "Remain" camp. In a report released Monday, the Treasury reckoned "the UK would be permanently poorer if it left the EU" in favor of any of the alternatives the report considered.

Specifically, those alternatives were: membership in the European Economic Area (EEA), such as Norway has; a bilateral trade agreement with the EU, such as those negotiated by Switzerland, Canada and Turkey; and World Trade Organization (WTO) membership, which would put Britain on par with Russia and Brazil vis-à-vis the EU. Depending on the scenario, the Treasury estimates that British GDP will be anywhere from 3.4% to 9.5% lower per year compared to its current trajectory.  

Annual impact of leaving the EU on the UK after 15 years (difference from being in the EU)
  EEA Negotiated bilateral agreement WTO
GDP level – central -3.8% -6.2% -7.5%
GDP level -3.4% to -4.3% -4.6% to -7.8% -5.4% to -9.5%
GDP per capita – central* -£1,100 -£1,800 -£2,100
GDP per capita* -£1,000 to -£1,200 -£1,300 to -£2,200 -£1,500 to -£2,700
GPD per household – central* -£2,600 -£4,300 -£5,200
GDP per household* -£2,400 to -£2,900 -£3,200 to -£5,400 -£3,700 to -£6,600
Net impact on receipts -£20 billion -£36 billion -£45 billion
Adapted from HM Treasury analysis: the long-term economic impact of EU membership and the alternatives, April 2016; *Expressed in terms of 2015 GDP in 2015 prices, rounded to the nearest £100.

Britain's GDP was $2,850 billion in 2015, according to the IMF's April 2016 World Economic Outlook, which the Treasury report cites. The country's GDP per capita was £28,634.10 in that year, according to the OECD (the report indicates that it uses OECD figures but does not reproduce them).

The Norway Scenario

Of these scenarios, the Treasury sees a Norway-style agreement as causing the least economic harm, but Brexit campaigners would balk at the terms of Norway's arrangement, which require the country to pay into the EU budget and accept visa-free travel as part of the Schengen area. Britain, although an EU member, has opted out of Schengen, and controlling migration from the continent is a key feature of the "Leave" camp's platform. (See also, British Pound Tumbles on Potential "Brexit.")

The Canada Scenario

Brexit campaigners including London Mayor Boris Johnson have argued that the UK would be able to negotiate a trade deal with the EU on favorable terms, while being free to negotiate bilateral deals with other countries. George Osborne, the UK's Chancellor, has called that argument "a complete fantasy."

The Economist, a pro-remain publication, has pointed out that European leaders would have incentive to give Britain the worst deal possible, in order to discourage other countries from using the threat of leaving as a bargaining chip. Britain has already negotiated changes to its relationship with the EU, including an opt-out from treaty language calling for "ever-closer union." 

The Treasury's report notes that the agreement with Canada has taken seven years to negotiate and has not yet gone into force, highlighting the length of time Britain might be out in the cold. In addition, the EU-Canada deal does not cover most services. While services accounted for about 15% of Canada's exports in 2013, the figure for Britain was over 40%. (See also, 3 Brexit Doomsday Scenarios.)

Britain specializes in providing financial services to Europe, despite the use of the pound instead of the euro, and Bank of England Governor Mark Carney (a Canadian) has warned that banking jobs could be at risk in the event of Brexit. In the same testimony before Parliament, Carney called Brexit "the biggest domestic risk to financial stability." Similarly, Goldman Sachs has weighed in on the "Remain" side, while the IMF has called Brexit a potential "shock" to the global economy

The "Leave" Reaction

In response to the Treasury report, Leave.EU, a pro-Brexit outfit associated with the UK Independence Party, said that the Treasury's "worst-case scenario of £4,300 per household is a bargain basement price for the restoration of national independence and safe, secure borders" (per household, the worst-case scenario appears to be £6,600). The "Leave" side tends to muster more emotional arguments based on sovereignty, national identity and freedom from Brussels' bureaucratic diktats.

"Remain" arguments have mostly concentrated on the potential economic consequences, which are necessarily vague given the nature of economic forecasting. While "Remain" supporters to lead in most polls, the margin is usually narrow, and the scarcity of evocative, positive arguments for EU membership – "Leave" supporters tend to cast their opponents as scaremongers or bean-counters – has led some to conclude that higher turnout will benefit the Brexit camp.

In addition, a prevailing mood of resentment towards economic elites, which is familiar to residents of any rich world democracy, means that the endorsement of Goldman Sachs, the IMF, the Treasury or the Bank of England is as likely to hurt as to help.

The Bottom Line

The Treasury has joined a host of institutions in warning that a British exit from the EU would be economically harmful, comparing the country's current growth trajectory with three different post-Brexit scenarios. The arguments may be sound, or they may assume too much, but in general Brexit supporters tend to discount dire forecasts from elite institutions in favor of intangibles such as freedom and security. Monday's report may sway some undecided voters, but it's hard to say whether it will change many minds among the "Leave" camp.