British Prime Minister Theresa May has warned opponents of her blueprint for Brexit that rejecting it means crashing out of the European Union without a deal, an outcome the International Monetary Fund said Monday would have “very large” economic costs.
May told the BBC that if rebel lawmakers shoot down a deal between her government and the EU, “the alternative to that will be having no deal.”
With just over six months until Britain is due to leave the 28-nation EU on March 29, May’s Conservative government remains divided over how close an economic relationship to seek with the bloc.
Ex-Brexit Secretary David Davis and Former Foreign Secretary Boris Johnson both quit May’s Cabinet in July and joined other Conservative Brexit-backers to push for a clean break with the EU. May is proposing to keep the U.K. aligned to EU rules after Brexit in return for free trade in goods and an open Irish border.
Johnson wrote in Monday’s Daily Telegraph that May’s Brexit negotiations were heading for a “spectacular political car crash” that would leave Britain in “the ditch with a total write-off of Brexit.”
Opponents of May’s blueprint claim leaving the EU — the U.K.’s biggest trading partner — without a free-trade agreement would be preferable because Britain would be free to strike new trade deals around the world.
IMF chief Christine Lagarde poured cold water on that notion Monday, saying “all the likely Brexit scenarios will have costs for the U.K. economy.”
The IMF says that even a good deal would mean new barriers to trade. As part of the EU, Britain currently enjoys the freedom of goods, services, money and people to move across borders with 27 other countries in the region. Brexit will revoke some of those freedoms.
“Whatever the deal is will not be as good as it is at the moment,” Lagarde said. A no-deal Brexit “would impose very large costs on the U.K economy,” she said.
In an update on U.K. economic prospects, the IMF forecast growth of 1.5 percent in 2018 and 2019, down from 1.75 percent in 2016-17.
Britain has fallen behind other Group of Seven economies since the 2016 vote to leave the EU, with business uncertainty holding back investment and a fall in the value of the pound slowing growth in incomes and consumption, the IMF said.