A month after the Brexit vote, he insisted a “balance can be struck” between free trade and limiting immigration.
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Its report, which was funded by the Economic and Social Research Council, added that just having access rather than membership of the single market was “virtually meaningless”.
Ian Mitchell, a research associate at the IFS and an author of the report, said: “There is all the difference in the world between “access to” and “membership of” the single market”.
The signals from Theresa May’s government in recent weeks suggest the “Norway” option is politically impossible and that ministers are preparing to leave the single market and attempt to generate some kind of free trade agreement with the rest of the bloc.
“No large country now enjoys membership of the single market without free movement of people alongside a financial contribution”, it found. “According to the IFS” report, which was published on Wednesday, single market membership will be key in determining how favourable these new business relationships will be. “Single market membership could be worth 4% on GDP [Gross Domestic Product] relative to reliance on WTO terms”.
The research organisation also stresses that the cost of losing membership of the single market would far outweigh the economic benefits of the United Kingdom no longer paying in a net £9bn a year into the European Union budget. The EU is also the UK’s largest service export destination, accounting for 40% of service exports whereas emerging economies such as Brazil, Russia, India and China together account for less than 5%, according to the report.
According to the IFS, new trade deals would be unlikely fill the gap created by losing European Union trade, which accounts for 44% of British exports and 39% of service exports.
“Even small proportionate losses in trade (or lost growth in trade) with the European Union would require quite dramatic – and probably implausible -increases in trade with such countries”.
It came as David Cameron’s former Director of Communications said that he has no regrets about the failed campaign to keep Britain in the EU.
The IFS said that without the so-called passporting that comes with single market membership and allows financial services firms in London to do business in Europe, a substantial portion of EU-related activity would consider moving elsewhere.
Nevertheless, the report concludes that those costs do not outweigh the benefits of continued membership.
Losing membership of the European Union’s Single Market could cost the United Kingdom 4% of economic output, according to an influential think tank.
Despite these concerns, the report highlights that the benefits to the United Kingdom economy of single market membership in the above scenario far outweigh the potential costs.
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Single Market Membership is particularly important for financial services. But it is unclear if European leaders would be prepared to accept that offer or if Leave voters would accept it if they did.
