Reversing Brexit would give 'significant' boost to UK: OECD

Britain voted to leave the EU in a June 2016 referendum and is due to exit the bloc in March 2019 (AFP Photo/EMMANUEL DUNAND) (AFP)

London (AFP) - Reversing Britain's shock Brexit referendum would hand a "positive" and "significant" boost to the economy, the OECD said on Tuesday.

"In case Brexit gets reversed by political decision (change of majority, new referendum, etc) the positive impact on growth would be significant," the Organisation for Economic Co-operation and Development (OECD) said in its latest assessment of the nation's economy.

A spokesman for British Prime Minister Theresa May stressed however that it was the government's position that there should not be a second referendum, with Brexit due to take place in March 2019.

The Treasury also said: "We are leaving the EU and there will be no second referendum."

The OECD meanwhile left its economic growth forecasts for Britain unchanged from its previous prediction of 1.6 percent in 2017 and one percent in 2018.

Britain should seek to maintain close economic ties with the European Union to weather the impact of Brexit, added the OECD which advises industrialised nations on economic policy.

However, the country's planned departure from the EU has worsened its existing productivity problem by increasing uncertainty and reducing business investment, it stated.

Reviving labour productivity growth is a challenge "compounded by Brexit", it said, adding that leaving the EU could reduce total factor productivity by about three percent after 10 years due to reduced trade.

The Paris-based organisation also warned that a "disorderly Brexit", one in which no trading relationship is arranged, would constitute a medium-term shock to Britain's economic growth prospects.

"Business investment would seize up, and heightened price pressures would choke off private consumption," the organisation added in the report.

"Negotiating the closest possible EU-UK economic relationship would limit the cost of exit."

Britain voted to leave the EU in a shock referendum in June last year.

Ahead of British finance minister Philip Hammond's annual budget on November 22, the OECD also said Tuesday that the Treasury has a buffer of 1.25 percent of gross domestic product relative to its structural deficit target of two percent of GDP.

It recommended investment targeted at increasing productivity, such as "spending on repair and maintenance or soft investment" if growth weakens further ahead of Brexit.

Hammond highlighted the issue before the Treasury parliamentary scrutiny committee on Wednesday, saying: "We do have a fundamental underlying problem about productivity growth in the UK economy".