Leaving the EU would hit British living standards, stoke inflation and wipe up to 5.5% off GDP, the International Monetary Fund has warned with less than a week to go until the referendum.
The IMF used its annual report on the British economy to say Brexit would plunge the UK into recession next year and that it could see no economic advantage in leaving the EU.
Previous IMF interventions have drawn an angry response from leave campaigners who have already said the fund should not interfere in the UK’s democratic process. The leave camp has also attacked its record on economic forecasting.
Responding to the latest IMF remarks, Matthew Elliott, chief executive of Vote Leave said: “The IMF has chosen to ignore the positive benefits of leaving the EU and instead focused only on the supposed negatives. If we vote leave, we can create 300,000 jobs by doing trade deals with fast growing economies across the globe. We can stop sending the £350m we pay Brussels every week. That is why it is safer to vote leave.”
The IMF said last month that Brexit could spark a stock market crash and a steep fall in house prices. In Saturday’s report to conclude its annual assessment of Britain’s economy, it added that a leave vote would tie the UK up in trade negotiations that could drag on for years.
The resulting uncertainty would hit spending and financial markets, it said, estimating that even under a relatively benign scenario in which the UK negotiated a trade status similar to that between Norway and the EU, output would fall by 1.5% by 2019, compared with where it would be under continued EU membership.
It modelled a less favourable outlook, in which GDP would fall more steeply. “In the adverse scenario of long negotiations and a default to the trade rules of the World Trade Organisation, GDP plunges by 5.5% by 2019,” it said.
Under that scenario, the UK would fall into recession in 2017, IMF officials said. “The implication would be negative growth in 2017,” said one official briefing reporters in a conference call.
In a baseline scenario in which the UK remains in the EU, growth would be expected to recover in late 2016, as the effects of the referendum waned. But the IMF’s experts also forecast various threats to the UK economy beyond the closely fought vote.