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14 November 2018

Financial Times: IMF warns no-deal Brexit would cause ‘widespread disruptions


The IMF came to the aid of Theresa May as she tried to build momentum behind her Brexit deal, warning that if the UK left without an agreement it would be hit by “widespread disruptions” to goods and services.

But in a move unlikely to find favour with the prime minister, it concluded that any form of Brexit was likely to hurt the British economy compared with continued EU membership. [...]

The IMF thinks that in the long term, trading on WTO terms would leave the UK economy 6.2 per cent smaller than if it had not left the EU — removing about four years of Britain’s growth. It said this estimate was uncertain and would range between 5.2 per cent and 7.8 per cent.

If the UK were to sign a free trade agreement with the EU, the economy would shrink in the long term by between 2.6 per cent and 3.9 per cent, the IMF said.

These estimates are similar, but a little smaller, to the government’s leaked assessment, which is likely to form the basis of the Brexit impact assessment ministers have promised to publish before MPs vote on any agreement. The government model suggested long-term hits of 4.8 per cent for a free trade agreement and 7.7 per cent if Britain traded on WTO terms.

The fund said the economic pain would stem from higher trade barriers with the EU, reduced migration slowing activity and a decrease in inward investment.

But the IMF reserved its most chilling warnings for the possibility of Britain leaving the EU without a deal at the end of March.

A no-deal Brexit “would have a large negative impact on growth, especially if it happens in a disorderly manner and without a transition period”, the IMF concluded, urging ministers to strike a deal with the EU. [...]

Full article on Financial Times (subscription required)



© Financial Times


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