Brussels, 13/05/2016 (Agence Europe) - The greatest risk weighing on the British economy is due to the uncertainty over the outcome of the referendum on keeping the United Kingdom in the European Union, the IMF stressed on Friday 13 May.
“A vote for exit would precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output”, the international organisation warns in a preliminary report carried out following a monitoring mission on the ground. It argues that the renegotiation of the relationship between the United Kingdom and the EU, as well as with the 60 third countries with which the EU has concluded trade agreements, would bring about “considerable political risks” that could continue for “years”, “weighing heavily on investment and economic sentiment during the interim and depressing output”. Whilst various estimates put the drop in growth resulting from the United Kingdom leaving the EU ('Brexit') anywhere between 1.5% and 9.5% of GDP, any economic slowdown of more than 1% of GDP would result in net budgetary losses to the United Kingdom, which would not be offset by the fact that the country would no longer make its contribution to the Community budget of 0.33% of GDP.
On a financial level, the IMF takes the view that “London's status as a global financial centre could also be eroded”. It goes on to highlight the risk that the markets will anticipate the negative economic impact of a 'Brexit', with the consequence of “sharp drops in equity and house prices, increased borrowing costs for households and businesses and even a sudden stop of investment inflows into key sectors such as commercial real estate and finance”.
The day before, the Governor of the Bank of England, Mark Carney, also said that the UK coming out of the EU would expose the country to a considerable downturn in growth and a hefty increase in inflation. He also warned that the pound sterling, which has lost 9% of its value since November 2015, could continue to plummet. (Original version in French by Mathieu Bion)