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Loss of EU single market will shrink UK GDP by 4%: IFS

Justin Tallis | AFP | Getty Images

One of the U.K.'s leading research institutions has placed the value of European single market membership at an additional 4 percent to the country's economy.

The EU single market goes further than most trade deals, allowing the free movement of both goods and services between countries. It also seeks to tackle regulatory barriers such as licensing.

On 23 June the U.K. public voted in favor of leaving the European Union , throwing in to doubt whether Britain can retain full membership of the single market or if the country will now seeks an 'access only' deal.

If the U.K. can join the European Economic Area (EEA) this would allow near-full benefits of the single market but would also mean an EU budgetary contribution and would likely oblige Britain to accept free movement of people.

A new report by the Institute of Fiscal Studies (IFS) has put a GDP value on the single market status for the U.K when compared to access achieved thorough the World Trade Organization (WTO), such as is enjoyed by the US, China or India.

"Maintaining membership of the single market as part of the EEA could be worth potentially 4 percent on GDP – adding almost two years of trend GDP growth – relative to WTO membership alone," the report reads.

Financial services are a famously strong aspect of the United Kingdom's economy.

The study suggest that the financial sector could be 'disproportionately damaged' outside the single market, placing it some 7 percent smaller by 2030.


Public finances impact

The IFS report also spells out the implications for the UK's public finances by leaving the EU.

"On top of the £24–31 billion weakening of the public finances by 2020 from the short-term impacts of leaving the EU for an EEA or FTA scenario, WTO membership would leave the government needing to find a further £4–8 billion, and more in the long term."

The IFS paper is also skeptical that the United Kingdom can fully compensate for the lack of EU membership by fostering new deals with other countries.

"Even if U.K. exports to China grow in line with strong Chinese economic growth through to 2030, export levels are unlikely to reach anywhere near current levels with the U.S. or EU."