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Warning to Vote Leave

Brexit ‘would lead to severe damage’ says IMF

EU flagA vote to leave the EU could do “severe regional and global damage” to the UK, according to the International Monetary Fund.

Economic output would shrink by between 0.5% and 1.5% by 2030 but the bigger impact could be disruption caused to trading relationships, it says.

The IMF said the “protracted” period of negotiating a British exit from the bloc could “heavily” affect confidence and investment while also increasing market volatility.

It said the referendum had already created uncertainty for investors and a vote to leave would only compound concern.

Prime Minister David Cameron said the report was a “stark warning” for the UK about the risks of leaving the EU.

However, John Longworth, who is chairing the Vote Leave campaign, said the IMF had a history of getting its predictions wrong.

In its World Economic Outlook, the IMF said: “In the United Kingdom, the planned June referendum on European Union membership has already created uncertainty for investors; a ‘Brexit’ could do severe regional and global damage by disrupting established trading relationships.”

It added: “A British exit from the European Union could pose major challenges for both the United Kingdom and the rest of Europe. Negotiations on post exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility.

“A UK exit from Europe’s single market would also likely disrupt and reduce mutual trade and financial flows, curtailing key benefits from economic cooperation and integration, such as those resulting from economies of scale and efficient specialisation.”

Responding to the statement, Chancellor George Osborne said: “For the first time, we’re seeing the direct impact on our economy of the risks of leaving the EU.”

He added: “If Britain leaves the EU, the IMF says there would be a short-term impact on stability and long-term costs to the economy.”

DB Photogtraphy advert 2Vote Leave chief executive Matthew Elliott hit back at the IMF’s analysis. He said: “The IMF has talked down the British economy in the past and now it is doing it again at the request of our own Chancellor. It was wrong then and it is wrong now,” he said.

The IMF downgraded the UK’s GDP outlook for 2016, predicting the economy will grow by 1.9%, down from 2.2% in its January forecast.

  • UK inflation rose from 0.3% in February to 0.5% in March as a result of higher air fares introduced at Easter, and a rise in the price of clothes.
    Inflation is now at its highest level since December 2014, but it remains below the Bank of England’s 2% target.The Bank has said that it expects inflation to stay below 1% this year.Martin Beck, senior economic advisor to the EY ITEM Club, said : “Although the headline and core measures of CPI inflation accelerated in March, this was entirely due to the impact of two temporary factors – the impact of an early Easter on air fares and base effects from last March’s unusual fall in clothing prices. Both of these factors will unwind in next month’s data.

    “Otherwise the inflationary environment remains benign. While the recent rise in the oil price has caused petrol prices to edge upwards, we saw a similar pattern last spring so it is not exerting any upward pressure on inflation rates. And with several of the ‘big six’ energy suppliers cutting their gas prices in late-March, this will put further downward pressure on inflation from April.

    “Today’s producer prices data does suggest that both input costs and output prices have now bottomed out, reflecting the influence of a weaker pound, so we are likely to see some modest inflationary pressures coming along the supply chain.

    “But unless there is an unexpected shock to either global commodity prices or the exchange rate, inflation looks set to continue running at similar rates for much of this year. Only once the base effects associated with last winter’s collapse in the oil price begin to kick in from December, are we likely to see the CPI measure move up to, and then above, 2%.”

 

 

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