No-deal Brexit will tip UK and EU into recession, IMF warns
The UK is set to automatically leave without a deal at 11pm on Friday unless an extension is agreed with the European Union.
Tuesday 9 April 2019 18:36, UK
A no-deal Brexit will tip both the UK and the EU into recession, the International Monetary Fund (IMF) has warned.
An abrupt exit from the European Union will see the UK's gross domestic product shrink by 3.5% within three years, the IMF said in its twice-yearly World Economic Outlook.
The report warned that Europe is also likely to be impacted by a disorderly exit, with the trading bloc's GDP decreasing 0.5% by 2021.
Setting out its forecast, the IMF said: "More generally, a no-deal Brexit that severely disrupts supply chains and raises trade costs could potentially have large and long-lasting negative impacts on the economies of the United Kingdom and the European Union."
The IMF also urged the Bank of England to take a "cautious" approach to interest rates in response to the uncertainty - and warned Chancellor Philip Hammond to be prepared to slow the pace of deficit reduction to support growth.
Last October, the IMF downgraded UK GDP growth from 1.5% to 1.2% for 2019 and from 1.5% to 1.4% for 2020 - assuming there is an orderly withdrawal from the EU with a transition agreement.
Earlier this year, the Bank of England warned that the UK was experiencing its weakest year for economic growth since 2007 and faced a one in four chance of falling into a recession.
The UK is set to automatically leave the EU without a deal at 11pm on Friday unless an extension is agreed with the European Union or by revoking Article 50.
The prime minister has been meeting leaders in Germany and France seeking to delay Brexit until 30 June as the government works with the opposition to get Theresa May's withdrawal agreement passed through parliament.
The IMF added that Brexit remains a risk to the wider world economy, warning that a no-deal outcome was one of the unpredictable factors that could trigger a "sharp deterioration" across the world.
World Economic Outlook also noted the world economy will grow by 3.3% this year, down from 3.6% in 2018 -- on course to be the weakest year since 2009.