The IMF said a no-deal Brexit would lead to a “significantly worse outcome” for economic growth than if a deal can be struck, especially if there was failure to agree an implementation period.
In the concluding statement of its regular assessment of the UK economy, the fund warned: “By contrast, an agreement featuring fewer impediments to trade than currently expected could buoy business and consumer confidence, leading to faster growth.”
With just over six months to go before the UK formally leaves the EU in March, the Washington-based fund said growth would remain moderate should the UK secure a smooth Brexit transition, enabling the economy to continue expanding at around 1.5% this year and next. It said such an outcome was its core expectation.
The prime minister has battled leading eurosceptics over her Chequers plan, warning that her plan for a deal with Brussels is the only option. She told the BBC on Monday it was either her deal, or no deal.
The IMF said UK growth has already dropped and business investment has been lower than would be expected since the EU referendum two years ago. It warned that all Brexit outcomes would be worse for the UK than EU membership, while arguing for an agreement that “minimises the introduction of new tariff and non-tariff barriers [which] would best protect growth and incomes in the UK and EU”.
Over time, new trade agreements with countries outside the EU could eventually reduce some of these losses for the UK, it said, adding: “However, such agreements are unlikely to bring sufficient benefits to offset the costs imposed by leaving the EU.”