IMF: No-deal will cut 3.5% from growth

A no-deal Brexit could cut the UK’S predicted GDP by 3.5 per cent by 2021 and leave the country’s potential output almost 3 per cent lower in the long term, the International Monetary Fund (IMF) has warned.

A no-deal departure from the EU which severely disrupts supply chains and raises trade costs would have “large and long-lasting negative impacts” on the UK and EU economies, with Britain the hardest hit, the IMF said.

In its twice-yearly World Economic Outlook, the global organisation downgraded last October’s forecast for UK GDP growth from 1.5 per cent to 1.2 per cent for 2019 and from 1.5 per cent to 1.4 per cent for 2020.

But it warned that the forecasts assume an orderly withdrawal from the EU with a deal and a gradual transition to the new regime. The actual outcome is “surrounded by uncertainty” over whether a deal will be reached, it said.

Downward revisions since October reflect “the negative effect of prolonged uncertainty about the Brexit outcome”, only “partially offset” by the fiscal stimulus provided by Chancellor Philip Hammond in his Budget, said the report.

The IMF found that UK GDP