Young people will be hit hardest by a British exit from the EU, according to the head of the CBI, who said there would be almost a million fewer jobs by 2020, with apprenticeships and graduate roles likely to be hit hard.
Carolyn Fairbairn said past experience told her that a third of the people hit by a slump in employment of 950,000, projected by her group in a study carried out with PWC, could be under the age of 34.
The director general, who said she felt “emotional” about the potential impact on young people, also revealed in an interview with the Guardian that the CBI’s partner organisations in Commonwealth countries, including Canada, India, South Africa, Singapore, Kenya and Jamaica, had spoken of plans to reduce the amount of money the invest in the UK in the event of Brexit.
Chandrajit Banerjee, the director general of the Confederation of Indian Industry, said his country invested more into Britain than in the rest of Europe combined, but that access to European markets was a key driver.
“Anything that lessens this attractiveness may have a bearing on future investment decisions,” he said. “It is important also to ensure continued border-free access to the rest of Europe for the many hundreds of existing Indian firms that have manufacturing bases in the UK.”
John Manley, the president and chief executive of the Business Council of Canada, said Britain was his country’s second port of call for investment after the US, but that was in “large measure because we consider the UK a gateway to the rest of Europe”.
A similar message was sent by the equivalent organisations elsewhere.
“We’ve talked to our Commonwealth partners, in India, New Zealand, Canada and South Africa. They are effectively saying they see the UK as an investment partner partly because of the cultural links, but partly because we are a gateway to Europe,” Fairbairn said.
“What they have said to a man and a woman, is that they would continue to invest in the UK, but to a much lesser extent.”
She said much of the investment went into deprived regions with high levels of youth unemployment, and that it would be “a huge problem and a sad thought” to reduce it.
“What we know from the financial crash is that young people were disproportionately affected. Employment rates barely changed [for] over 30s, but fell by 4% for under 30s. Real incomes fell two or three times as much for the under the 30s. We have history here,” she said.
“The Treasury is projecting a technical recession. In our work with PWC we believe that it is very likely there would be a recession. What kind of jobs would go? I link it back to the investment into the UK. My feeling is a lot will be in the apprenticeship field. I’d worry about apprenticeship and graduate opportunities.”
She added, however, that in the very long run Britain would “find its way”, returning to almost the same point as if Brexit had not happened.
“I agree we shouldn’t be overstating economic risks. But economic study after economic study from organisations that don’t have an axe to grind say there will be a short term shock to the economy for a number of years. I absolutely believe that and I feel emotional about it because it will affect young people,” Fairbairn said, claiming the Treasury assumptions were not outlandish.
“What is clear from what companies are telling us, they will pause decisions and they will make decision to go elsewhere while that is going on. The adaptation will happen, but we estimate between 500,000 to 1m jobs by 2020, and about a third in age group 16 to 34.”
Vote Leave said Fairbairn’s warning did not square with her own statistics. It said the PWC study suggested employment would still grow, though by a lower amount than in a remain scenario.
The out campaign argued there was little evidence that investment into the UK would slow down, giving examples of major deals from China and India in recent months.
It also said the car manufacturers Toyota, Nissan and Hitachi had indicated that they would continue to invest in Britain whatever the outcome.
John Longworth, the chair of Vote Leave’s business council said the real risk to the economy was the unstable EU, dominated by the eurozone, in which Britain had little power.
“An unlimited supply of cheap labour from the EU has had a downward pressure on wages and disincentivised training for skills and investment for productivity,” he said.
“It has been a disaster for working people and we preside over more than half a million unemployed under 25s, which is a national scandal. If we stay in the EU we are heading for a low wage, low skill, low productivity economy in which any growth in GDP is shared among more and more people as living standards fall behind.”
The CBI said the assumptions of the PWC model were moderate, and that both scenarios of what might happen post-Brexit had living standards, GDP and employment significantly reduced compared with staying in.
“By 2020, the overall cost to the economy could be as much as £100bn and 950,000 jobs. Household income in 2020 could be up to £3,700 lower than it would otherwise have been. The economy would slowly recover over time, but never quite track back to where it would have been,” said Rain Newton-Smith, the group’s chief economist.
