‘No deal’ Brexit risks severe economic shock, IMF warns

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Britain’s economy risks a serious shock if the UK leaves the EU without a deal, the International Monetary Fund said Tuesday, warning of severe trade disruption and slower economic growth.

In a report marking the coming spring meeting, published just days before the scheduled Brexit date of Friday, the IMF looked at the impact of possible “no deal” scenarios.

In the worst-case situation, the fund assumes that a disorderly break between Britain and its largest trading partner would bring border disruption, raising import costs for businesses and households in Britain.

It estimates that the trade disruptions in that scenario would cause a decline in Britain’s gross domestic product (GDP) of 1.4 percent in the first year, and 0.8 percent in the next.

The European Union would not be immune from the impact, although it would be less severe, with the bloc’s GDP falling 0.2 and then 0.1 percent.

The IMF adds that the total impact would be a decline of 3.5 percent of British GDP between now and 2021 and 0.5 percent for the EU.

The fund notes however that it cannot predict all the effects of a “no deal” Brexit, or all the mitigating measures that might be taken.

The “no deal” scenarios assume that, in the absence of a new trade agreement, British exports to the EU revert to being subject to World Trade Organization (WTO) rules.

This would see tariffs increase, while Britain would also lose access to trade agreements struck between the EU and other countries.

The IMF estimates are also based on published British plans to dramatically slash tariffs on imports from the EU.

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