No-deal Brexit would inflict substantial costs on UK, IMF says
Until a deal is reached, uncertainty over EU exit is likely to weigh on investment
London: The International Monetary Fund (IMF) added its voice to calls for UK Prime Minister Theresa May to strike a Brexit deal with the European Union.
All options for leaving the EU involve costs, but departing without a deal would inflict “substantial costs for the UK economy, and to a lesser extent the EU economies — particularly if it were to occur in a disorderly fashion,” the Washington-based IMF said on Monday. Until a deal is reached, Brexit uncertainty is likely to weigh on investment, it said.
The organisation is predicting growth of about 1.5 per cent this year and next — a forecast based on a timely trade pact and a relatively smooth exit process thereafter. A more disruptive departure could lead to “a significantly worse outcome,” the IMF said.
The IMF’s warnings over a disorderly Brexit come just days after Bank of England (BoE) governor Mark Carney joined a cabinet meeting that was convened to discuss planning for what happens if Britain crashes out of the bloc without a deal. He outlined worst-case scenarios used by the central bank, including house prices tumbling, a falling pound and higher trade tariffs.
In a joint press conference with IMF managing director Christine Lagarde, UK Chancellor Philip Hammond said that Britain must heed the body’s warnings, and it was vital that the nation reaches a Brexit agreement. A no-deal outcome was unlikely but not impossible, he said.
The next few weeks will be crucial. The prime minister addresses her party conference on October 3; navigate that, and an EU summit later that month beckons. Both sides could be in a position to confirm a Brexit agreement at a specially convened meeting in November.
It’s unlikely to be as straightforward as that. Though it’s not clear whether pro-Brexit members of her Conservative Party have the numbers to oust May, the risk is that they try anyway, throwing the government into chaos with the clock ticking down toward Britain’s departure from the EU in March.