UK Economy Will Shrink Without Brexit Deal

Britain’s economy will shrink if the country leaves the European Union next year without a Brexit deal and any deal will leave the country financially worse off than staying in, the International Monetary Fund said on Monday.

The IMF said it expected Britain’s economy would grow by about 1.5% a year in 2018 and 2019 if a broad Brexit agreement was struck, compared with about 1.75% if it had stayed in, Reuters reported.

Failure to get a deal would leave to a contraction, IMF Managing Director Christine Lagarde said. “A more disruptive departure will have a much worse outcome,” she said as the IMF presented its annual report on Britain’s economy.

“Let me be clear, compared with today’s smooth single market, all the likely Brexit scenarios will have costs for the economy and to a lesser extent as well for the EU,” she said. “The larger the impediments to trade in the new relationship, the costlier it will be. This should be fairly obvious, but it seems that sometimes it is not.”

Britain is due to leave the EU in March next year but London and Brussels have yet to strike a deal to secure a transition period. Prime Minister Theresa May is hoping to make progress towards a deal when she meets fellow EU leaders this week.

The IMF said there was a “daunting” range of issues still to be dealt with before Brexit.

Britain’s economy—the world’s fifth-biggest—slowed after the 2016 referendum decision to leave the EU and it continues to be outpaced by most other rich nations.

However, stronger-than-expected data last week showed the economy had its fastest growth in nearly a year, helped by the World Cup and hot summer weather.

But May insisted her Brexit plan was the only alternative to leaving the EU without an agreement. Despite strong opposition in her Conservative party and criticism in Brussels, May has stuck by the so-called Chequers proposal to keep close trade ties with the European Union after Brexit on March 29 next year.

"The alternative to that will be not having a deal," she told the BBC in an interview out Monday.

May will meet EU leaders in Salzburg on Wednesday and Thursday, as she seeks a breakthrough in talks on the Brexit divorce and the future UK-EU trading relationship.