London: Australian businesses operating out of Britain are being warned their special access to Europe's financial sector could be lost if Britain votes to leave the EU, amid fears such a move could see foreign investors boycott London altogether.
The gloomy warning from the Organisation for Economic Co-operation and Development (OECD) came as it released predictions that the cost to each household of voting yes in the June referendum would be £2200 ($4140) a year. The OECD calculated Britain's economic growth would shrink 3 per cent if it leaves the European Union. The roughly 87,000 Australians living in Britain are allowed to vote in the June 23 referendum, which polls show could go either way.
Speaking at the London School of Economics, OECD Secretary-General Angel Gurria dubbed the estimated cost a "Brexit Tax", which he said would be a double whammy as it would not involve revenue to spend on services.
Declaring there was "no economic upside whatsoever" to Britain leaving the EU, Mr Gurria said even the "best outcome under Brexit is still worse than remaining ... while the worst outcomes are very bad indeed".
"The Brexit Tax would be a pure deadweight loss, a cost incurred with no economic benefit and this tax would not be a one-off levy. Britons would be paying it for many years," he said.
"And frankly, I think our estimates are too cautious," he added.
Challenged about the use of the term "tax" to describe an estimated cost, Mr Gurria did not back down from his classification.
"To what do you attribute the fact that you are worse off? To the decision of Brexit. And therefore it acts like a tax but as I said without you getting the proper benefits, i.e. the services that you normally get," he said.
"It's a good way to put it simply because it is a very easy to understand the notion that you would be out of something."
The OECD's dire warning coincided with the release of the Britain's latest economic growth figures, which showed the economy slowed in the first three months of 2016.
The Office for National Statistics showed Britain's GDP grew by 0.4 per cent between January and March compared with 0.6 per cent in the final quarter of 2015.
The figures were in line with economists' expectations and are the lowest for a single quarter since 2012. Mr Gurria said the figures underlined his point about the impact of Brexit.
"Already the previous quarter business investment was weak as the Brexit issue gained prominence," he said.
This was backed by the Chancellor of the Exchequer George Osborne who said: "There are warnings today that the threat of leaving the EU is weighing on our economy.
"Let's not put the strong economy we're building at risk, and vote to remain on June 23," he said, citing the OECD research.
Vote Leave hits out at OECD
The Vote Leave campaign immediately hit out at the "EU-funded" OECD and accused it of talking down Britain, while conceding the economy would continue to grow even if Britain left.
"The OECD is talking down Britain and we completely disagree with its pessimistic assumptions about life outside the EU," the British Conservative MP Priti Patel said.
"Despite it making every possible worst-case assumption, it is still forced to admit that the British economy will continue to grow if we Vote Leave."
"Britain is strong enough to stand on its own two feet – we will thrive when we Vote Leave," Ms Patel said.
Speaking to the BBC's Radio Four, UKIP leader and prominent EU-sceptic Nigel Farage dismissed the findings.
"IMF, OECD, a whole series of international organisations stuffed full of failed politicians mostly," he said.
Foreign businesses warned
The so-called passporting system allows financial services companies to market and set up a base in a European Economic Area, without needing to comply with each member state's individual regulations.
Under this arrangement, Australian companies operating from Britain have access to Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
Mr Gurria said foreign businesses could leave Britain or boycott it altogether if the island nation leaves the EU.
"One of the great things that comes with belonging to the EU family is that you have passporting rights to establish ... in other markets," he said.
"That access which we today consider organic, totally natural, would be in jeopardy. One should not assume that will remain."
Foreign Minister Julie Bishop has previously told British Prime Minister David Cameron, who supports remaining in the EU, that: "Australia believes it would be in our interest if a strong United Kingdom remained a part of the European Union.
"The EU is a significant trading partner for us. A strong UK as part of the European Union would be in Australia's interests," Ms Bishop has said.
Trade Minister Steve Ciobo was meeting potential investors in London on Wednesday.
