“There will be no winners from Brexit” and the current lack of progress in negotiations “raises the risk of a disruptive exit,” its report published today said.
The report predicts Ireland will suffer the most of the EU27, with a potential 2% decline in income levels if a standard free trade agreement is struck, but that will double to 4% in a “hard” Brexit. This is based on simulations that isolate trade effects and show that the impact would not be evenly distributed across the EU.
The IMF also report that Brexit’s negative macroeconomic impact will be “disproportionately larger” for the UK than the EU, along with certain member states such as Belgium, Luxembourg, Malta and the Netherlands as well as Ireland.
Last week in a speech to parliament, newly installed Brexit secretary, Dominic Raab announced he and prime minister Theresa May had agreed to “step up our planning for a no-deal scenario, so that the UK is ready for Brexit… no matter what the outcome of these negations.” He expressed hope that the EU will engage with UK proposals but that this type of preparation was the “responsible thing for a government to do.”
With eight months until implementation day in March 2019, Raab is not alone in preparing for the worst. Nausicca Delfas, executive director of international at the Financial Conduct Authority (FCA) said in a speech to TheCityUK on Thursday “we must prepare for all scenarios, including the possibility of a ‘no-deal’ or ‘hard’ Brexit at March 2019.” She added that the FCA have been working with the Bank of England and government on “safeguards and contingencies in the event of a hard Brexit, to ensure that ‘day one’ works smoothly.”
The European Commission (EC) also warned its member states to be prepared “for the withdrawal and to mitigate the worst impacts of a potential cliff-edge scenario, all actors need to take their responsibilities.”
The EC also told operators in the UK financial services sectors to prepare for a scenario in which they have no single market access and their provision to the EU27 is “regulated by the third country regimes in EU law.”
Meanwhile, the Lords' EU external affairs committee heard on Thursday that the cost to businesses of the facilitated customs arrangement could cost £700m per year, though again this remains far lower than the cost of a no deal scenario.