LONDON — The range of issues left to solve to secure a smooth Brexit is “daunting,” which makes a Brexit deal with a transition period crucial to avoid “serious disruptions” in the short term and “substantial costs” to the economy in the long term, the International Monetary Fund said today.
In its annual statement on the health of the U.K. economy, the IMF highlighted how growth had already slowed since the EU referendum and was expected to stay subdued, averaging about 1.5 percent this year and next as a result of slow income growth and restrained investment due to Brexit uncertainty.
Those growth estimates are based on the assumption of a Brexit agreement covering goods and some services, and a relatively smooth transition. A disruptive departure could lead to a “significantly worse outcome,” the IMF said.
Reaching a deal with the EU is “critical” in order to avoid a no-deal Brexit on WTO terms which would “entail substantial costs for the U.K. economy,” while a deal that reduces the impact of new tariff and non-tariff barriers “would best protect growth and incomes in the U.K. and the EU.”
However, even if a deal is secured, it is “unlikely to bring sufficient benefits to offset the costs imposed by leaving the EU.”
Meanwhile, “the range of issues that remains to be addressed is daunting as is daunting the small time left to address them,” IMF Managing Director Christine Lagarde said.
She added that the IMF is working on calculating the impact of a range of Brexit outcomes, including a disorderly Brexit, which is expected to be completed in November.