Brexit would lead to 'negative and substantial' hit on UK economy, IMF warns
The UK economy would suffer from a "negative and substantial" hit and a reduction in national income of 5.6 per cent by the end of the decade if the country votes to leave the European Union, according to an in-depth analysis produced by the International Monetary Fund (IMF).
The IMF said the government could potentially be forced to breach its targets of eliminating the deficit and cutting state debt in the event of Brexit.
The 64-page special report confirms the initial findings of the organisation's study released in May, which led managing director Christine Lagarde to rate the consequences of leaving the EU between "pretty bad to very, very bad" for the UK.
What does the IMF report say?
In its key finding, it states: "The balance of evidence points to notable downward economic risks to the UK" from Brexit.
The report found:
Brexit would lead to reduced trade, employment, output, productivity and investment, permanently lower incomes, a permanent fall in the value of Sterling and higher prices for imported goods in the shops;
Market disruption immediately after a Leave vote could lead to banking liquidity drying up, sparking a credit squeeze on households and businesses;
The extent of damage would depend on the trade deals Britain could strike with the remaining EU and other potential export markets around the world. The IMF set out two possible outcomes - each rated worse than continued membership;
There is a "low" likelihood of productivity gains from a wave of post-Brexit deregulation, contradicting the claim made by the Leave campaign;
There were no "clear signs" that EU membership constrains the UK from deregulating, as the most onerous red tape is "domestically-controlled";
There was "little evidence" that EU immigrants have caused job losses and lower wages for UK citizens, but data suggests they have boosted UK productivity, output and GDP per capita;
Savings from reduced contributions to the EU budget "would likely be outweighed by lower revenues from expected lower output, resulting in a net fiscal loss".
The IMF also warned the process of withdrawing from the EU would be complicated and "associated with considerable uncertainty" and may become "hostage to domestic political considerations in other European states".
It also played down suggestions that other EU states would have as strong an incentive as the UK to maintain free trade, pointing out that "in overall terms the EU is much more significant for the UK than is the UK for the EU".