Impact of Brexit weighing on UK economy: IMF
The IMF said that despite a strong recovery in global growth, the impact of Britain’s decision to exit the European Union has weighed on the economy.
"The sharp depreciation of sterling following the referendum pushed up consumer price inflation, squeezing household real income and consumption.
"Business investment growth has been lower than would be expected in the context of strong global growth and high levels of capacity utilisation, owing to heightened uncertainty about economic prospects.
"Overall, output is expected to grow by 1.6 percent this year, broadly in line with our estimate of the economy’s potential."
For 2018, the organisation maintained its forecast of 1.5% growth but said that soaring inflation will continue to pile pressure on real wages and consumer spending power.
It also said that firms are likely to continue deferring investment decisions until there is greater clarity on the UK’s future trading relationship with the European Union.
Worryingly, the IMF warned that if Brexit leads to the movement of a "meaningful share" of the financial sector outside the UK, available tax revenues could fall fast.
Chancellor Phillip Hammond said the report underlined the need to avoid a "cliff edge" Brexit.
"One of the biggest boosts we can provide to the economy - the economy of the UK and the economy of the EU27- is making early progress on delivering certainty and clarity about our future relationship with a time-limited implementation period agreed at the earliest opportunity," he said.
