No-deal Brexit could hit UK's GDP by 8%, says new IMF report
The UK economy could take a hit of up to 8% if there is no Brexit deal, the International Monetary Fund (IMF) has warned.
In its assessment of the various Brexit outcomes, the IMF said the level of gross domestic product (GDP) is estimated to be between 5% and 8% lower if the UK leaves the EU without a free trade deal. This is compared to the projections for a scenario in which the UK remains in the EU.
The estimates assume a transition to World Trade Organisation (WTO) rules, which would mean higher tariffs on goods trade between the UK and EU.
Under a free trade agreement, Britain's GDP would likely fall by between 2.5% and 4%, according to the report.
Aodhan Connolly of the Northern Ireland Retail Consortium warned that consumers could immediately face higher prices and reduced availability of products in the event of a no-deal.
"If we do have a backstop, we still need to make sure that administration and checks are kept to a minimum as these will cause delays which translate as costs for our shoppers. Now more than ever we need common sense to prevail and protect our consumers," he said.
Glyn Roberts of Retail NI said the lobby organisation has continually called for "a sensible deal which limits the potential damage to the local economy". He said: "We will support a deal that ensures no delays in the vital retail supply chain, which promotes bridges rather than borders and, above all else, ensures that Northern Ireland businesses have full and free access to the EU and UK single market. Northern Ireland could potentially be the bridge to the EU and have the best of both worlds in regard to the UK and EU."
Speaking yesterday, IMF managing director Christine Lagarde said a no-deal Brexit would "impose a very large cost on the UK economy".
The IMF said without a deal, a significant increase in trade barriers "will lead to lower production, investment and exports".
Financial services are expected to be hit particularly hard by disruption due to contractual and operational challenges.
A sharp decline in confidence following a no-deal exit would also raise the risk of a period with higher inflation but lower earnings and GDP.
Further weakness in the pound would also hit household real incomes, while property prices would likely drop.
In addition, the no-deal scenario could have negative economic consequences for the rest of the EU due to higher trade barriers and a possible increase in the cost and availability of financial services.