- Title: IMF sees no economic upside to Brexit
- Date: 13th May 2016
- Summary: UNKNOWN LOCATION, BRITAIN (FILE) (REUTERS) VARIOUS SIGNAGE FROM THE "LEAVE" CAMPAIGN
- Embargoed: 28th May 2016 12:26
- Keywords: Britain UK European Union EU referendum Brexit economy growth IMF Christine Lagarde Osborne
- Location: LONDON, UK
- City: LONDON, UK
- Country: United Kingdom
- Topics: European Union,Government/Politics
- Reuters ID: LVA0064HN4X8N
- Aspect Ratio: 16:9
- Story Text:International Monetary Fund chief Christine Lagarde said on Friday (May 13) there were no economic positives to Britain leaving the European Union and that the impact would range from "pretty bad to very, very bad".
Her blunt warning came as the IMF said the country risks falling into a spiral of weaker economic growth, lower house prices and diminished foreign investment if voters opt to leave the European Union after the referendum next month.
In its annual report on Britain's economy, the IMF said an exit vote would "precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output."
A sudden stop to investment in key sectors of the economy such as commercial real estate and finance could exacerbate Britain's record-high current account deficit, the report said.
Lagarde addressed the report's findings during a news conference in London.
"The majority of economic analysis that's been conducted agree that a vote to depart the EU would be costly in the long run, even after this uncertainty has been resolved. And in the short term there is also a risk of an adverse market reaction to a Leave vote, the implications of which could be particularly severe given what I said earlier about the UK's financial position in the world and the UK's high current account deficit. Should a sharp drop in external financing follow an exit vote, for example, this would imply a significant depreciation of sterling, and large contractions in investment and consumption implying lower output, lower growth and higher domestic prices," she said.
The hit to Britain's economy if it votes to leave would range from "pretty bad, to very, very bad", she added.
The IMF said Britain, after a Brexit vote, could take years to renegotiate trade deals with the EU and other countries, hitting investment and weighing heavily on economic sentiment.
The uncertainty surrounding the outcome of the referendum is in itself having an impact on the economy, according to the IMF.
"The IMF are clear that even the prospect of a leave vote is already having an impact on investment and hiring decisions and weighing on economic growth in the UK. But the Fund are also clear that this could be a mere taste of things to come if we were to leave," said UK Chancellor, George Osborne.
The comments came a day after the Bank of England said Britain's economy would slow sharply, and possibly enter a brief recession, after a vote to leave the EU.
"The British people have been clear. They want facts and they want credible, independent opinion to help inform their decision. Today the independent IMF reinforced the conclusions of the independent Bank of England. These are the facts that the British people need to hear. If we vote to leave, British families will be poorer, and Britain will be poorer. Incomes would be hit, businesses would suffer and we'd have less money to spend," Osborne added.
The Organisation for Economic Co-operation and Development has also warned that a Brexit would hurt Britain's economy. It said on April 27 that British voters risk paying a "Brexit tax" equivalent to a month's salary by 2020 if they left the EU.
But predictions of an economic hit do not appear to have swayed many voters. Opinion polls show Britons believe staying in the EU would be best for the economy but they remain evenly divided on how they intend to vote on June 23. - Copyright Holder: FILE REUTERS (CAN SELL)
- Copyright Notice: (c) Copyright Thomson Reuters 2016. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None