UK would face huge economic downturn, warns IMF
‘Widespread disruptions’
BRITAIN could face a calamitous loss of output if it fails to reach a free trade deal with the EU, the International Monetary Fund warned last night.
The Washington-based institution said that if the UK reverted to World Trade Organisation rules – as advocated by some Brexiteers – growth could be cut by up to 7.8 per cent over the next decade. This would see Britain’s economy worse off to the tune of nearly £6,000 per household.
There would be a less severe impact if Britain were to sign up to a Canadastyle free trade deal. But this would rob the British economy of up to 4 per cent of output.
In its assessment of the various Brexit outcomes, the IMF also warned that if there is no deal, the UK would be hit by ‘widespread disruptions’. The gloomy report came as businesses were urged to back the deal Theresa May has reached with the EU.
Juergen Maier, UK chief executive of German firm Siemens, told Radio 4’s Today programme: ‘My gut feeling is that we need to get behind it and we need to make this deal work because what we need is certainty.’
After the 2016 referendum, IMF managing director Christine Lagarde warned Brexit would be ‘pretty bad, to very bad’ for the UK. But since then Britain’s jobless rate has fallen to just 4.1 per cent of the workforce and the economy has continued to expand.
The IMF’s latest forecasts of the amount of lost growth from a no-deal Brexit are lower than the Treasury’s own leaked forecasts. A no-deal Brexit would ‘have a large negative impact on growth, especially if it happens in a disorderly manner and without a transition deal’, the IMF said.
A sudden departure from the EU would lead to a sharp drop in property prices, a plunge in sterling, a hit to business and consumer confidence and ‘widespread disruptions’ in production and services, it said.
The size of shock from such an outcome ‘would be more severe’ than a negotiated agreement to abide by WTO rules or an agreed Canada-style free trade area.
The timing of the IMF report could be helpful for the Prime Minister as she seeks to persuade critics to accept her deal.