Yellen: Brexit vote ‘could affect US economy’
7 June 2016
- From the section EU Referendum
A UK vote to leave the EU could have “significant economic repercussions” for the US, Federal Reserve chair Janet Yellen has warned.
She said Brexit was one factor that the US central bank would consider when deciding whether to raise interest rates.
Her comments come as Hitachi said it would “rethink” investment plans if the UK quit the EU.
Vote Leave says EU membership has helped multinationals, not small firms.
In a speech on Monday, Ms Yellen stressed that investors’ “appetite for risk” could change quickly and that a UK exit from the EU would be likely to affect market sentiment.
Her remarks echo comments from other economists about the impact of a Brexit on the US economy.
On Friday Lael Brainard, a member of the Fed’s board of governors, suggested that a Brexit could cause a “significant adverse reaction” to the US market and impact on economic recovery.
Meanwhile, writing in the Mirror, Hitachi’s chairman said the “cold economic reality” was that Brexit would lead to uncertainty and extra costs for business.
Hiroaki Nakanishi suggested Japan had invested heavily in the UK on the basis that its firms were “treated as European”.
Leave campaigners say the UK will still be able to trade tariff-free with the rest of the Europe outside the EU’s single market and will be liberated to negotiate more dynamic trade deals with other countries.
Hitachi is the latest foreign investor in the UK to warn of the consequences of a vote to leave in the referendum on 23 June. Last week US investment bank JP Morgan Chase said it could cut up to 4,000 jobs in the event of an EU exit.
Mr Nakanishi said his firm, whose European headquarters is located in Berkshire, had invested £1bn in the UK energy and rail sectors in recent years. He said it was in the process of recruiting 730 new workers to build the next generation of high-speed inter-city trains.
But if the UK was to leave the EU, he said the future investment case would look “very different”.
The UK was the “best base” to access the EU’s internal market of 500 million customers and the firm’s capacity to win more business and deliver orders could be derailed by going outside it.
“In the 80s Nissan and Toyota came to the UK on the basis that if they produced here and employed a British workforce they would be treated as European companies,” he said.
“This was only possible because Britain was inside the EU; and so the UK car industry was revived and became an exporter again. From Japan, this incredible success story looks like a huge gain from the UK’s membership of the EU.”
“We worry because those advocating Brexit have no answer to how the UK could negotiate cost-free access to this huge market from a position outside it.
“It would take a long time and result in uncertain market conditions; during this renegotiation period, investors would probably be waiting to see the outcomes, hold back on investment, and jobs would be lost. This is the cold economic reality of Brexit.”
On a visit to London last month, Japanese prime minister Shinzo Abe warned that leaving the EU would make the UK less attractive to Japanese investors.
Hitachi’s intervention came as the Remain campaign said UK firms faced £34.4bn in non-tariff barriers outside the single market, an “export tax” equivalent to £80,000 per individual business.