By Jason Douglas 

LONDON--The opposing camps in the debate over the U.K.'s membership of the European Union traded blows over the economy Monday, with anti-EU campaigners criticizing an official analysis suggesting Britain could be plunged into a yearlong recession if Britons vote to leave the bloc in a referendum next month.

The U.K. treasury said in a new analysis that the British economy would likely experience "a profound shock" if voters decide to quit the 28-member EU, potentially causing "a marked deterioration in economic prosperity and security."

Speaking alongside Prime Minister David Cameron to present the analysis, Treasury chief George Osborne said a vote in favor of a British exit, or Brexit, could tip the economy into recession, when output falls for two or more consecutive quarters.

The treasury's sums suggest national income could be sharply lower after two years than it would be if voters choose to stay in the EU, a shortfall it said would mean higher government borrowing, higher unemployment and lower wages.

"Within two years the size of our economy--our GDP--would be at least 3% smaller as a result of leaving the EU, and it could be as much as 6% smaller," Mr. Osborne told workers gathered at a branch of a home-improvements company in southern England. "We'd have a year of negative growth--that's a recession."

Mr. Cameron said that voting to leave the EU shortly after the U.K. climbed out of the deep downturn caused by the global financial crisis in 2008 "would be like surviving a fall and running straight back to the cliff edge. It is the self-destruct option."

The treasury's assessment of the potential short-term costs of Brexit comes on the heels of similar warnings from the Bank of England, the International Monetary Fund and the Organization for Economic Cooperation and Development, all of which concur that leaving the EU could damage the U.K.'s economic prospects by damping trade and slowing investment.

Britons are scheduled to vote June 23 on whether to remain in the EU or go it alone as the world's fifth largest economy.

But advocates of a British exit fiercely dispute such claims, saying they fail to take into account the potential benefits of leaving an association they say stifles business with red tape and raises barriers on trade with the rest of the world.

"We can flourish outside," Boris Johnson, the former Conservative mayor of London and leading pro-Brexit campaigner, told a crowd of people at a campaign stop in the north of England.

Patrick Minford, professor of applied economics at Cardiff University and one an eight-strong group called Economists for Brexit, said at an event in London that the Treasury's "shock-horror" report is based on faulty assumptions. He has calculated that the British economy could grow faster outside the EU, because of potential gains from lowering trade barriers with non-EU countries and savings from foregoing payments into the EU budget.

Any financial-market volatility caused by uncertainty over the U.K.'s future prospects would likely be short-lived, Mr. Minford added in an address to Politeia, a London think-tank focused on the role of the state in social and economic affairs.

Economists at Capital Economics, a consultancy founded by pro-Brexit economist Roger Bootle, said in a note to clients that the treasury analysis doesn't factor in interest-rate cuts or other policy responses that the authorities may pursue to counteract any post-referendum slowdown. A Brexit vote might cause a slowdown but "the treasury's central forecast of a recession, albeit a mild one, goes a bit too far," said U.K. economist Scott Bowman.

The sparring over the economy comes as the referendum campaign enters its final weeks. Polls show the public are split over whether to remain in the EU, although most show a slim lead in favor of staying in.

Nick Winning contributed to this article.

Write to Jason Douglas at


(END) Dow Jones Newswires

May 23, 2016 12:04 ET (16:04 GMT)

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