The International Monetary Fund (IMF) has warned on the effects that a no-deal Brexit would have on the UK economy.
Christine Lagarde, the IMF’s managing director, said on Monday that all Brexit scenarios are likely to “entail costs” but crashing from the EU without a deal could lead to “a significantly worse outcome”.
“Those projections assume a timely deal with the EU on a broad free trade agreement and a relatively orderly Brexit process after that,” she said in London.
“Any deal will not be as good as the smooth process under which goods, services, people and capital move around between the EU and the UK without impediments and obstacles.”
The IMF has predicted that the UK’s economy will grow by 1.5 percent in both 2018 and 2019 if a broad Brexit agreement is struck.
When asked why a no-deal EU departure would be bad, Lagarde said: “It would be a shock to supply, and would result in reduced growth, increased deficit, depreciation of the currency…and in reasonable short order, it would mean a reduction in the size of the UK economy.”
Philip Hammond said that the government would take the IMF’s warning very seriously.
“The IMF are clear today that no deal would be extremely costly for the UK as it would also for the EU, and that despite the contingency actions we’re taking, leaving without a deal would put at risk the substantial progress the British people have made over the past 10 years in repairing our economy,” he said.
Lagarde described herself as “a desperate optimist” over Brexit and hoped the UK and EU would reach a deal before March 2019.