No-deal Brexit will hit UK economy hard, warns IMF
PUBLISHED: 18:18 14 November 2018 | UPDATED: 18:18 14 November 2018
PA Archive/PA Images
The International Monetary Fund has warned Theresa May the UK economy will suffer a brutal hit if the country crashes out of Europe.
Become a Supporter
The New European is proud of its journalism and we hope you are proud of it too. If you value what we are doing, you can help us by making a contribution to the cost of our journalism
In a cutting assessment of the worst Brexit outcomes, the IMF said the level of gross domestic product (GDP) would be between 5% and 8% lower if the UK leaves the EU without a free trade deal.
This is compared to the projections for a scenario in which the UK remains in the EU.
The estimates assume a transition to World Trade Organisation (WTO) rules, which would mean higher tariffs on goods trade between the UK and EU.
Under a free trade agreement, Britain’s GDP would likely fall by between 2.5% and 4%, according to the report.
IMF managing director Christine Lagarde said a no-deal Brexit would “impose a very large cost on the UK economy”.
The IMF said without a deal, a significant increase in trade barriers “will lead to lower production, investment and exports”.
Financial services are expected to be particularly hard-hit by disruption due to contractual and operational challenges.
A sharp decline in confidence following a no-deal exit would also raise the risk of a period with higher inflation but lower earnings and GDP.
Further weakness in the pound would also hit household real incomes, while property prices would likely drop.
In addition, the no-deal scenario could have negative economic consequences for the rest of the EU due to higher trade barriers and a possible increase in the cost and availability of financial services.
Become a Supporter
The New European is proud of its journalism and we hope you are proud of it too. We believe our voice is important - both in representing the pro-EU perspective and also to help rebalance the right wing extremes of much of the UK national press. If you value what we are doing, you can help us by making a contribution to the cost of our journalism.