The UK got a controversial financial report card on Monday from an organisation that represents many of the world’s richest countries. Between praise of the country’s employment rate, concerns about productivity, and analysis of the impact of devalued currency, it was dominated by two words: “Brexit” and “uncertainty.”
Buried in the biennial report was a note which suggested that were the British government to reverse Brexit, “the positive impact on growth would be significant,” prompting the Treasury to reiterate that a second referendum was not on the cards.
The Organisation for Economic Cooperation and Development (OECD) announced the findings of its annual survey on the British economy on Oct. 17.
“The United Kingdom is facing challenging times, with Brexit creating serious economic uncertainties that could stifle growth for years to come,” OECD Secretary-General Ángel Gurría said, according to the OECD website.
“Maintaining the closest economic relationship with the European Union will be absolutely key, for the trade of goods and services as well as the movement of labour.”
Chancellor Philip Hammond, who attended the publication of the report in London, said that the report highlighted the need for a post-Brexit transitional arrangement with the European Union.
“There is great potential to exploit the underlying strengths of the UK economy, and boosting productivity is the way to turn those strengths into real wage growth and living standards”, he said after the event, according to the Financial Times.
The report notes that the UK’s labor market has performed “remarkably well” despite a slowdown, with unemployment lower and the employment rate the highest ever since the financial crash.
“Real wages, however, are on a downward trend,” said Gurria, noting that British productivity also lags behind other countries in Europe.
The report also says that a “disorderly exit” from the EU single market and customs union in 2019 “would hurt trading relationships and reduce long-term growth.”
With talk of reversing Brexit already in the air, fanning hopes and fears in critics and supporters of Brexit, the OECD alluded to the benefits of holding a second referendum, and of the 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.”
The Treasury said in a statement that “we are leaving the EU, and there will not be a second referendum,” reported The Guardian.
At the Oct. 17 launch of the report, Hammond said, “[By] delivering a time-limited transition period, avoiding a disruptive cliff-edge exit from the EU, we can provide greater certainty for businesses up and down the UK, and across the European Union.”
The report said that a breakdown in EU–UK negotiations would trigger an adverse reaction from financial markets, “pushing the exchange rate to new lows and leading to sovereign rating downgrades.”
“Business investment would seize up, and heightened price pressures would choke off private consumption.”
The report recommends that the UK adopt simple criteria for dealing with EU citizens living and/or working in the UK.
Founded in 1961, the OECD is a group of 35 of the wealthiest countries in the world. However, its roots go back to the Organisation for European Economic Cooperation, which was set up in 1948 to operate the U.S.-led Marshall Plan to patch war-ravaged Europe back together.
The OECD includes non-European countries and was founded with the aim of fostering economic interdependence among members.