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Lloyds Banking Group warns of Brexit 'economic uncertainty'

Published 14/04/2016

Lloyds Banking Group said a vote for Britain to exit the European Union would be 'potentially volatile'
Lloyds Banking Group said a vote for Britain to exit the European Union would be 'potentially volatile'

Lloyds Banking Group has waded into the debate over Britain's referendum on Europe, warning that Brexit was likely to cause "economic uncertainty" in the short term.

The banking giant said a vote for Britain to exit the European Union would be "potentially volatile", but it was unclear how it would impact the UK economy in the long term.

It added: "The board is mindful that the future of the UK's relationship with the EU is a matter for the UK electorate, and that for many the debate is about more than just economics."

The high street lender was asked about its stance on Britain's membership of the EU in February when it announced its annual results, but said the board would take time to discuss the issue before revealing its view.

Its comments come after the Bank of England warned that a Brexit vote could hurt the economy and ''push down on demand''.

Members of the Bank's Monetary Policy Committee (MPC) said the economy may face "an extended period of uncertainty'', as it considered the ''likely implication for monetary policy'' if Britain left the European Union.

Lloyds chairman Lord Norman Blackwell expressed his personal views on the issue in October last year when he said Britain's membership of the EU was not sustainable without "significant change".

But the Conservative peer said Britain was "likely to remain an attractive global location" whatever the outcome of the EU referendum on June 23.

He said: "I don't agree that remaining in the European Union without a significant change in the current arrangements is ultimately sustainable from a political and constitutional perspective."

He added: " We are not and never will be part of the eurozone, so the reality is that we cannot be at the heart of a European Union that becomes increasingly focused on the governance and political decision-making of an integrated eurozone core."

Lloyds is the first bank to reveal its official stance on the EU referendum vote.

However, Barclays boss Jes Staley, RBS chief executive Ross McEwan and HSBC chief executive and chairman Stuart Gulliver and Douglas Flint have all said they would like Britain to remain in the EU when speaking in a personal capacity.

But the chief executive of Lloyds, Antonio Horta-Osorio, remained tight-lipped on the issue when the bank revealed its full-year results in February, saying it was a ''matter for the British people''.

The International Monetary Fund (IMF) downgraded its forecast for UK economic growth on Tuesday over fears of disruption if Britain leaves the EU.

The IMF scaled back its projection of UK economic growth for 2016 by 0.3 percentage points to 1.9% - marginally below the 2% forecast of the Government's Office for Budget Responsibility - but held its forecast for 2017 at 2.2%.

In its World Economic Outlook, the global financial body warned that Brexit could inflict "severe regional and global damage" by disrupting trade relations.

Lucy Thomas, deputy director of Britain Stronger In Europe, said the warning from Lloyds underscored the "huge risks to workers, savers and homeowners" if Britain voted to leave the EU.

She added: "Leave campaigners who think this market is 'not important' should reflect on the at least three million jobs dependent on our trade with Europe."

Chairman of the Vote Leave business council, John Longworth, said: " Twenty years ago, Lloyds told us that we should join the euro. They were wrong then and they are wrong now.

"What right do multinationals have to lecture us? The EU may work for the handful of large multinational banks that can afford the reams of red tape, but it will be the dynamic SMEs that will benefit if we Vote Leave on 23 June."

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