A stark report issued by the International Monetary Fund states that the UK economy would rapidly start to contract in the event of disruptive exit from the EU next spring. Christine Lagarde, Managing Director of the IMF, said there would be “dire consequences” from a disorderly exit but added that there would be costs to the UK under any outcome. She said, “If that happened there would be dire consequences. It would inevitably have consequences in terms of reduced growth, an increase in the deficit and a depreciation of the currency. In relatively short order it would mean a reduction in the size of the economy.”
She warned that there is no conceivable Brexit deal as beneficial for the economy as staying in the European Union. “Whatever the deal is, it will not be as good as it is at the moment,” Lagarde said. Just last week, the Bank of England Governor Mark Carney gave a briefing to the Cabinet last week in which he reportedly said the adoption of the Prime Minister’s Chequers plan could boost the economy by around 1 per cent.
The IMF's warning came in the preliminary findings of its annual health check into the UK economy. Chancellor Philip Hammond responded to Lagarde's remarks, citing them as proof that the UK had to strike a deal that would safeguard jobs and prosperity. “As the IMF has said, no deal would be extremely costly for the UK as it would be for the EU. Despite contingency planning, it would put at risk the significant progress made over the past 10 years in repairing the economy,” he said.
“Let me be clear, compared with today's smooth single market, all the likely Brexit scenarios will have costs for the economy and to a lesser extent as well for the EU. The larger the impediments to trade in the new relationship, the costlier it will be. This should be fairly obvious, but it seems that sometimes it is not,” Lagarde said.
