LONDON – The International Monetary Fund offered on Wednesday fresh predictions suggesting economic growth in the United Kingdom this year had slowed from 1.7 percent to 1.6 percent because of its decision to leave the European Union.
In its latest health check on the UK economy, the Washington-based IMF welcomed recent progress in the Brexit negotiations but warned that lower business investment, economic uncertainty and a drop in the value of pound sterling would contribute to a downturn in the country’s growth, which could fall even further to 1.5 percent in 2018.
“Growth in the first three quarters of 2017 was slower than a year ago,” the report said. “Despite a strong recovery in global growth and supportive macroeconomic policies, the impact of the decision to exit the European Union has weighed on private domestic demand.”
The paper will be presented by IMF CEO Christine Lagarde at the UK Treasury later on Wednesday.
The IMF welcomed a recent breakthrough in the Brexit negotiations, which moved the process on to future trade talks, but highlighted a long list of outstanding tasks for London, ranging from striking a future commercial relationship with Brussels and 60 other countries the UK currently deals with via its EU membership to transferring thousands of EU laws into UK legislation ahead of withdrawal from the bloc.
A transition period, the IMF said, would avoid a “cliff-edge” Brexit.
The UK’s Chancellor of the Exchequer Phillip Hammond welcomed the IMF report and said it demonstrated why securing such a transition period was important.
UK Prime Minister Theresa May has suggested that the UK should continue to abide by EU laws and regulations for two years after Brexit, meaning the final process would be complete by March 19, 2021.
The EU’s chief Brexit negotiator Michel Barnier, however, has countered that timetable, saying the transition period should terminate in 2020.