The economic reality of a no-deal Brexit – IMF

As UK Prime Minister Theresa May faces ongoing opposition over her Brexit plan, the International Monetary Fund (IMF) has provided sobering evidence of the economic impact should the UK leave without an agreement.

“Moderate growth of just above 1.5% percent is projected for the coming years, conditional on reaching a broad free trade agreement (FTA) with the EU and a smooth Brexit process,” according to the IMF, pointing out that there are risks on both sides. “On the upside, an agreement with fewer impediments to trade could boost confidence and lead to higher growth. 

“On the downside, reverting to WTO trade rules, even in an orderly manner, would lead to long-run output losses for the UK of around 5-8% of GDP compared to a no-Brexit scenario. This is because of higher tariff and non-tariff trade barriers, lower migration, and reduced foreign direct investment.” 

A worst-case scenario, the IMF points out, would be a disorderly exit without a transition period. “Such an outcome would lead to a sharp fall in confidence and reversal of capital flows, which would affect asset prices and the value of sterling. Careful preparation and close cooperation between the EU and UK authorities would help mitigate risks to financial stability associated with a potential disorderly Brexit.”

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