LONDON: Reversing Britain鈥檚 shock referendum to leave the EU would 鈥渟ignificantly鈥� boost the economy, the OECD said on Tuesday, while the government inisted there were no plans to cancel Brexit.
鈥淚n case Brexit gets reversed by political decision (change of majority, new referendum, etc) the positive impact on growth would be significant,鈥� the Organization for Economic Co-operation and Development (OECD) said in a new report.
The Treasury responded saying: 鈥淲e are leaving the EU and there will be no second referendum.鈥�
A spokesman for British Prime Minister Theresa May also reiterated the government鈥檚 position that there should not be a second referendum, with Brexit due to take place in March 2019.
The OECD meanwhile left its economic growth forecasts for Britain unchanged at 1.6 percent in 2017 and one percent in 2018.
The OECD, which advises industrialized nations on economic policy, said Britain should seek to maintain close economic ties with the European Union to weather the impact of Brexit.
The Paris-based organization warned that a 鈥渄isorderly Brexit,鈥� one in which no trading relationship was arranged, would constitute a medium-term shock to Britain鈥檚 economic growth prospects.
鈥淏usiness investment would seize up, and heightened price pressures would choke off private consumption,鈥� the organization said.
鈥淣egotiating the closest possible EU-UK economic relationship would limit the cost of exit.鈥�
Britain voted to leave the EU in a shock referendum in June last year.
Speaking to MPs earlier, Bank of England governor Mark Carney blamed a pick-up in inflation to 3.0 percent on the tumbling value of the pound since the Brexit vote, and said that a transition agreement for Britain鈥檚 withdrawal from the EU was in 鈥渆veryone鈥檚 interest.鈥�
The country must now 鈥渟tay calm and carry on,鈥� said OECD Secretary-General Angel Gurria at the presentation of the report.
Asked whether the UK should pursue a longer transition period for exiting the EU, Gurria said: 鈥淐ommon sense was invented by the British 鈥� if you need more time then give it more time.鈥�
The OECD also said that Brexit could exacerbate Britain鈥檚 existing productivity problem by increasing uncertainty and reducing business investment.
Reviving labor productivity growth was a challenge 鈥渃ompounded by Brexit,鈥� it said, calculating that leaving the EU could reduce total factory productivity by about three percent after 10 years due to reduced trade.
The OECD recommended investment targeted at increasing productivity, such as 鈥渟pending on repair and maintenance or soft investment鈥� if growth weakens further ahead of Brexit.
British finance minister Philip Hammond said that weak productivity was one of the issues he would focus on when he presented his annual budget on November 22.