THE UK – Britain’s economy is likely to suffer “substantial costs” if it leaves the European Union next March with no divorce agreement in place, the International Monetary Fund warned Monday.
A no-deal Brexit, whereby Britain faces World Trade Organization tariffs, would “entail substantial costs for the UK economy – and to a lesser extent the EU economies,” the IMF said in its quarterly assessment.
The predictions came in the IMF’s latest annual assessment of the UK economy.
Speaking at a news conference at the Treasury in London, Christine Lagarde, the IMF’s managing director, added: “Those projections assume a timely deal with the EU on a broad free trade agreement and a relatively orderly Brexit process after that.
“Any deal will not be as good as the smooth process under which goods, services, people and capital move around between the EU and the UK without impediments and obstacles.”
A no-deal outcome would affect other EU economies “to a lesser extent”, the IMF said.Ms Lagarde said a “disorderly” or “crash” exit from the EU would have a series of consequences, including reduced growth, an increased deficit and depreciation of sterling, leading to a reduction in the size of the UK economy.
“This should be fairly obvious, but it seems that sometimes it is not.”
She pointed out that countries tended to trade mostly with their neighbours, adding: “I think geography talks very loudly.”
Recent UK economic data has shown a pick-up in growth. Earlier this month, the Office for National Statistics said the economy had grown by 0.6% over the three months to July – the fastest pace in almost a year.
The latest IMF prediction represents a slight upgrade for 2018. In July, the IMF said the UK economy would grow by 1.4% this year and 1.5% in 2019.