Philip Hammond’s claim that the UK economy can expect a bounce following parliamentary backing for a Chequers-style deal has won the backing of the International Monetary Fund.
The Washington-based organisation said there would be a jump in consumer spending and business investment following a deal that secured frictionless trade with the European Union, lifting the UK’s growth rate beyond the 1.5% it expects for 2019.
In a report on the outlook for the British economy, the IMF also backed up the chancellor’s claim that the failure of MPs to agree a deal would bring forward much of the financial pain of leaving the EU.
IMF officials said they had not worked out the direct impact of Brexit in their most recent analysis, but it was clear that a hard Brexit without a deal would harm the UK economy.
“A disruptive departure without an implementation period could have serious negative economic consequences,” it said in its annual health check.
“While all likely Brexit outcomes will entail costs for the UK economy by departing from the frictionless single market that now prevails, an agreement that minimises the introduction of new tariff and non-tariff barriers would best protect growth and incomes in the UK and EU.
“Close cooperation and coordination with the EU to prevent disruptions and mitigate risks will be important to achieve a smooth transition,” it said.
In his budget last month, Hammond said the economy would get a double boost from a Chequers-style deal that almost replicated the current trade arrangements for goods across the EU.
He said the outlook for growth would improve, generating higher business profits and wages that in turn would boost tax receipts, giving the government greater leeway to increase public spending and cut taxes.
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