IMF says UK leaving the EU will lead to negative economic consequences

Friday, May 13, 2016 

Christine Lagarde, head of the International Monetary Fund (IMF), today said the United Kingdom (UK) voting to leave the European Union (EU) would have negative consequences for the country's economy and the wider financial system.

File photo of Christine Lagarde, 2010.
Image: Marie-Lan Nguyen .

An IMF report released by Lagarde said voting to leave the EU would cause "a protracted period of heightened uncertainty", created by the UK needing to negotiate a withdrawal from the EU. Agreements with 60 other countries who currently have trade agreements with the EU would also need to be reached if the UK was to continue trading with them on the same terms. The IMF has also identified the UK's large current account deficit, the difference imports and exports, as a factor increasing the risks of a vote to leave.

These comments follow similar ones made by Mark Carney, the Governor of the Bank of England, who also warned that leaving the EU could lead to a fall in the value of the pound sterling. The Bank also estimated half of the currency's recent fall in value was caused by the uncertainty created by the referendum.

Vote Leave and Leave.EU, campaigning to leave the EU, responded by pointing out shortcomings in the IMF's previous predictions, such as the effect of the Greek financial crisis. Former UK Chancellor Lord Lamont commented, "There are plenty of respected individual economists, plenty of respected professional investors, and plenty of entrepreneurs who take a very different view from Christine Lagarde".

Sources

• "IMF says Brexit 'pretty bad to very, very bad'" — BBC News Online, May 13, 2016
• AP. "IMF warns EU exit risks London's status as financial hub" — The Daily Mail, May 13, 2016
• Peter Spence. "Why does Christine Lagarde think the UK’s current account deficit could make Brexit worse?" — Telegraph Media Group, May 13, 2016