The International Monetary Fund (IMF) warned on Tuesday (April 9) that a no-deal Brexit would sacrifice between two and three years of normal economic growth for Britain’s economy between now and 2021, according to a report from Reuters.
Britain, which has the world’s fifth biggest economy, could potentially exit the European Union by as soon as Friday (April 12). Even with an orderly Brexit without a deal, the economy would take a huge hit – growth that is 3.5 percent less than it would be under a better Brexit.
“The increase in trade barriers has an immediate negative impact on U.K. foreign and domestic demand,” the IMF said.
The economy in the EU would also be affected, but not as much, as the IMF predicts a 0.5 percent decrease to gross domestic product (GDP). British goods being exported to the EU and other countries would face new regulations and tariffs if Britain went back to World Trade Organization rules.
The IMF, which in the past has been accused of politically motivated forecasts by Brexit supporters, said that a worst-case scenario, a no-deal Brexit would heighten the damage to around 4 percent of GDP by 2021.
The prediction took into consideration the U.K.’s decision not to put tariffs on most imports and also the cutting of interest rates by the Bank of England (BoE).
Britain’s Finance Ministry said it wanted a deal, but was making preparations for not having one. The Governor of the BoE Mark Carney said the government could only do so much to stem the damage a no-deal Brexit would cause.
Economic growth in Britain is forecasted to be at its lowest level since 2009, at 1.2 percent.
“The downward revisions … reflect the negative effect of prolonged uncertainty about the Brexit outcome, only partially offset by the positive impact from fiscal stimulus announced in the 2019 budget,” the IMF said.
It warned that the BoE should take a “cautious, data-dependent” approach when setting monetary policy.