Cocktail of risks may hit growth, warns IMF

BRITAIN’S recovery faces a cocktail of risks including the EU referendum, soaring house prices and turmoil in the global economy, the International Monetary Fund warned yesterday.

In its latest health check on the UK, the Washington-based watchdog said that the ‘relatively positive outlook is subject to risks and uncertainties’ from around the world.

Managing director Christine Lagarde risked the wrath of Eurosceptics by highlighting the perceived threat of a so-called Brexit in the referendum in June.

The former French finance minister, a close ally of George Osborne, who like David Cameron wants Britain to stay in the EU, warned that quitting would be ‘negative on all fronts’.

She said: ‘Uncertainty is bad in and of itself. No economic player likes uncertainty. They don’t invest, they don’t hire, they don’t make decisions in times of uncertainty.’

The IMF said that it expects the UK economy to grow by 2.2pc both this year and next – but added that Britain was vulnerable to global ‘shocks’.

‘Considerable progress has been achieved in the post-crisis repair of the UK economy,’ the Fund said.

But it warned that high levels of household debt – in part driven by house prices rising far faster than wages – posed a threat to the outlook.

‘High house prices result in some households taking on high leverage, posing financial stability risks,’ the IMF said.

It also warned that buy-to-let landlords are ‘more vulnerable to an unexpected rise in interest rates or a fall in income’ than other borrowers.

It came as figures from the British Bankers’ Association showed lending to business rose by £3.4bn last month.

This was the biggest increase since July 2008 and suggested that banks are finally lending to companies again as the economy recovers and confidence grows.

‘Lending to businesses was boosted by companies looking to take advantage of record low interest rates,’ said Howard Archer, chief UK economist at IHS Global Insight.