The economics of EU membership for the UK can be viewed as the payment of a “membership fee” in return for improved macroeconomic performance, the key components of which are the rate of inflation, the rate of unemployment, and the level of GDP. The fee comprises the costs of acceptance of the rules of the club notably through the UK’s net contribution to the EU budget, other costs from the Common Agricultural Policy, and net costs of EU regulations including on freedom of movement.
In a modern OECD economy, in the medium term it is reasonable to think that the rate of inflation is determined by monetary policy which is under the control of an inflation-targeting central bank. Since the UK has remained outside the Euro this means that inflation outcomes are not affected by EU membership. Similarly, in the medium term the (equilibrium) level of unemployment depends on labour market institutions and policies, such as the conduct of industrial relations and the design of the system of unemployment benefits, and these are decided by domestic politics rather than EU regulations. In the shorter term, the level of aggregate demand may also affect unemployment but policies to influence this are also under UK control. There are, however, several ways in which EU membership has impacted on UK productivity performance and thus the level of real GDP per person. These potential benefits can be compared with the membership fee.
The accession of the UK into the EEC reduced the costs and increased the volume of international trade as both tariff and non-tariff barriers to trade decreased, increasingly so as the original customs union progressed into the European Single Market which represents a significantly greater degree of economic integration than the European Free Trade Area (EFTA) to which the UK belonged prior to 1973. Trade liberalization along these lines can be expected to increase productivity both by the realisation of gains from specialisation along lines of competitive advantage and also by lowering production costs…