- Thursday, April 25, 2024
By: Lauren Codling
by LAUREN CODLING
BRITAIN needs to come to a decision over Brexit as it poses a threat to the UK and global economies, a leading economic expert has said, as the UK government remains in political deadlock since MPs rejected prime minster Theresa May’s withdrawal deal last Tuesday (15).
Gita Gopinath, the chief economist of the International Monetary Fund (IMF), made the comments on Monday (21), stating it was “essential” that a conclusion was reached.
“We have already seen the negative effect of this uncertainty on British investment,”
Gopinath told reporters in Davos, Switzerland, ahead of the opening of the World Economic Forum summit.
“It is imperative for leaders to resolve this uncertainty immediately.”
The Indian-American economist said the IMF had already calculated that if Britain crashed out of the EU without a deal the result would be “a decline in long run… GDP of five to eight per cent”.
After her initial deal was rejected last week, Theresa May unveiled a new “Plan B” on Monday.
However, fears are growing that Britain will crash out of the EU on March 29 unless MPs can force a delay or come up with an alternative plan that Brussels is also happy with before the deadline.
The prime minister has confirmed she will be organising further talks with Brussels to try to salvage the Brexit deal.
MPs are due to debate next Tuesday (29) on the government’s proposed Brexit plan.
Gopinath’s comments came after the IMF released an update to its global economic forecast, showing that a range of uncertainties, including Brexit but also US-China trade confrontations, were threatening to drag down global growth even further.
The World Economic Outlook cut the global GDP forecast for this year to 3.5 per cent from the 3.7 per cent projected in October.
And for 2020 the estimate was trimmed to 3.6 per cent.
While it cut forecasts for several national economies, it forecast 1.5 per cent 2019 growth for Britain, the same as in October.
Lord Swraj Paul, an industrialist and founder of the Caparo Group, agreed with Gopinath’s comment.
Describing it as a “sad situation…and very un-British,” the peer said he doubted anyone was proud of the Brexit outcome so far.
“The government is doing whatever it can to sort it out, but it is a strange situation,” Lord Paul told Eastern Eye on Tuesday (22).
“Parties are fighting among themselves, not even against the opposition. But I have no doubt that it will get sorted out.”
The industrialist, who believes a second referendum would be a “mistake”, added he did not think delaying the deadline would make a difference.
“It would be a waste of time,” he said. “We must act mature and get on with it.”
Lord Jitesh Gadhia also concurred with Gopinath’s comments about the impact of uncertainty.
Speaking from the World Economic Forum in Davos on Tuesday (22), he said the global economy is facing “several headwinds” – ranging from a slowdown of the Chinese economy to trade tariff disputes to quantitative tightening of monetary policy.
“The more we can take uncertainties like Brexit off the table, the better the prospects for business confidence and long-term investment,” the investment banker told Eastern Eye.
Josh Hardie is the deputy director-general of the Confederation of British Industry (CBI).
Responding to Gopinath’s comments, he described the projected impact on the UK economy as “devastating”.
“While business will do [everything] it can to reduce some of the worst aspects, a no-deal scenario is unmanageable,” Hardie said.
Subsequent to the “historic” defeat in parliament, Lord Karan Bilimoria, the founder and chairman of Cobra Beer, believes the negotiations should be put on hold and a so-called People’s Vote should be held.
According to the founding chairman of the UK-India Business Council, figures show that the
UK economy could be 3.9 per cent smaller after 15 years under the prime minister’s Brexit plan, compared with staying in the EU.
The British pound has also lost 12 per cent of its value since May 2016.
Lord Bilimoria also highlighted a CBI estimate which showed that a no-deal Brexit could shrink the UK economy by 9.3 per cent over the same period.
“[This is] a catastrophic scenario which would have a deep impact on our neighbours and trading partners,” Lord Bilimoria said.
Describing Gopinath’s comments as “spot on”, he added that the uncertainty over the UK’s future and the fear of a no deal Brexit have caused foreign direct investment in the UK to halt.
“The UK has already tumbled from being the fastest-growing economy in the Western hemisphere in February 2016 to having the lowest growth forecasts over the next five years ever, at two per cent,” he noted.
He added: “For partners like India where the UK is the largest foreign investor in the G20 – accounting for nearly five per cent of total foreign direct investment (FDI) – this is very bad news indeed. Virtually no country in the world wants the UK to leave the EU.”
Also sharing Gopinath’s sentiments is Dr Rami Ranger CBE. The Sun Mark founder, who had backed May’s Brexit deal, said it would be in the interest of the world’s economy that a deal be struck between the UK and EU.
In this ever-shrinking world, he said, no country can avoid impacting many other nation’s economically with its own economic conditions.
“The economies of more and more countries are becoming increasingly interlinked,” he explained.
“For example, many countries have invested in the UK with the view to accessing the European single market, and if these countries cannot trade freely with Europe, then this will impact many other countries in the global economy.”
(With agencies)
