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21st of October 2018

International



Brexit is becoming a threat to world economy, report claims

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Brexit is becoming a rising threat to the world economy, a damning new report suggests.

One of the International Monetary Fund (IMF)’s most detailed studies of the state of banking since the financial crisis reveals trade tensions are building and claims a ‘growing anxiety’ around a breakdown in negotiations between Britain and the EU could lead to financial uncertainty.

It has called on banks to ‘step up their preparations for a post-Brexit landscape’ and suggests measures for a no-deal Brexit should be made ‘in as much detail as possible’.

Skyline of Canary Wharf is pitured as the sun sets, in London on November 17, 2017. Several banks and financial enterprises are threatening to leave the Great Britain after Brexit. Goldman Sachs boss, Lloyd Blankfein, calls for second Brexit referendum. (Photo by Alberto Pezzali/NurPhoto via Getty Images) The world’s largest banks must ‘step-up preparations for a post-Brexit landscape,’ the reports says (Picture: Alberto Pezzali/Getty Images)

A disorderly Brexit could also ‘adversely affect market sentiment’, the IMF warns.

But the US organisation’s study stresses that despite the Brexit uncertainty, banks are still safer now than they were in 2008 after the financial crisis.

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‘Growing anxiety about a breakdown in Brexit negotiations could give rise to contractual and operational uncertainties in the United Kingdom and elsewhere in Europe,’ the report says.

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‘A sharp tightening of global financial conditions could be triggered by a further escalation of trade tensions or by a sudden shift in risk sentiment caused by rising geopolitical risks or policy uncertainty in major economies.’

The IMF has also warned that UK public finances are among the weakest in the world.

International Monetary Fund (IMF) managing director Christine Lagarde speaks during a press conference in Tokyo on October 4, 2018. (Photo by Kazuhiro NOGI / AFP)KAZUHIRO NOGI/AFP/Getty Images International Monetary Fund managing director Christine Lagarde has headed the latest research (Picture: AFP/Getty Images) A British Union flag, also known as the Union Jack, left, flag hangs beside a European Union (EU) flag ahead of the resumption of Brexit talks at the Berlaymont building in Brussels, Belgium, on Thursday, July 19, 2018. Dominic Raab took Parliament questions for the first time as Brexit Secretary today, ahead of his meeting EU counterpart Michel Barnier in Brussels. Photographer: Pablo Garrigos/Bloomberg via Getty Images Brexit has been identified as a potential threat to the economy (Picture: Pablo Garrigos/Bloomberg via Getty Images)

Ben Brettell, a senior economist at Hargreaves Lansdown, said: ‘Overall, though, the picture is still one of muddling through.

‘Strong growth over the summer is likely to reassure policymakers that the recent interest rate rise was warranted, but they’ll be hoping to see the momentum maintained as Brexit approaches.

‘Markets are still pencilling in a further rise around the middle of next year – though clearly a disorderly Brexit would pose a significant risk to that outlook.’

Further threats to global economy include ‘unsettled’ politics and the escalating trade tensions between the US and China.

These were worsened last month after China slapped $60billion of tariffs on US-made goods.

The IMF is made up of 189 countries working primarily to secure financial stability and reduce poverty around the world.

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