IMF warns of ‘negative and substantial’ impact of Brexit
Britain’s Prime Minister David Cameron speaks during a press conference after the summit of the leaders of the Group of Seven industrialized nations in Shima, central Japan, Friday, May 27, 2016. G-7 leaders wrapped up their annual summit Friday claiming a “special responsibility” for leading international efforts to cope with challenges. In their declaration, the summit leaders cited a possible departure of Britain from the European Union, depending on the outcome of a June 23 vote, as one of many potential shocks for the global economy. AP
WASHINGTON — A UK vote to leave the European Union would seriously hurt the British economy and possibly lead to a recession next year, the International Monetary Fund warned Friday.
An IMF report estimated that were Britain to leave the EU, its economy could contract by as much as 0.8 percent in 2017. In 2019, economic output could be up to 5.5 percent lower to what it would be if the country remains in the 28-member EU.
While the Washington-based IMF cautioned that the decision was for the British voters to make, IMF experts believe that “the net economic effects of leaving the EU would likely be negative and substantial.”
An exit by Britain, referred to as “Brexit,” would likely lead to reduced trade and financial flows with other EU members, lower investment and consumer confidence and higher financial market volatility. All this could prompt major financial firms to relocate from London.
“Such effects could over time erode London’s status as Europe’s preeminent financial center,” the IMF said.
British voters go to the polls on June 23.
If the UK leaves, it would no longer be obligated to make mandatory financial contributions to the EU. But those savings will likely be offset by losses triggered by a decline in trade and investment, the report said.
The IMF also said that leaving the EU will trigger a lengthy, complicated and uncertain process of negotiating new trade terms with EU members and Britain’s other trading partners, which in itself could decrease investor confidence and shake markets.
On the other hand, were Britain to remain the EU, that would help dissipate uncertainty and could support a rebound in growth of some 1.9 percent this year, according to the Fund.
Matthew Elliot, the chief executive of Vote Leave dismissed the IMF report as its “latest intervention in the referendum debate” and said it ignores the positive aspects of leaving the EU, such as job creation and saving government funds.
“If we Vote Leave we can create 300,000 jobs by doing trade deals with fast growing economies across the globe,” Elliot said in a statement. “We can stop sending the £350 million we pay Brussels every week. That is why it is safer to Vote Leave.”
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