A messy Brexit could have “significant consequences” and is the biggest short-term risk to the British economy, Christine Lagarde said to Portugal’s state council, the Portuguese president’s highest consultative body.
“All likely Brexit outcomes will involve net costs for the UK economy. But the higher the impediments that arise in the new relationship with Europe, the higher the cost,” added the IMF chief.
Britain is due to leave the European Union at the end of March, but Theresa May’s government is still trying to arrange a raft of changes to the Brexit deal in order to win support from MPs.
Lagarde said that EU states will be affected by the UK’s exit, “to varying degrees,” and that Brexit was, “the most significant near-term risk to the UK economy” if the country left without a deal.
Lagarde stated that, Portugal, whose largest tourist market is from Britain, will be hit if there is a hard Brexit.
“Important trade and tourism links could be disrupted, and a loss of financial market confidence outside your borders could lead to higher sovereign and bank interest rates, which would weigh on growth,” Lagarde told the council.