IMF: Brexit could ‘erode’ London’s status as finance hub

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The International Monetary Fund has warned London’s status as a global financial centre would be damaged by a vote to leave the European Union.

In its annual report into the UK’s economy, the IMF says leaving the EU would have “a negative and substantial” effect on economic growth, while also hitting London’s attractiveness as a financial centre.

The IMF says: “London’s status as a global financial centre could also be eroded, as UK-based firms may lose their ‘passporting’ rights to provide financial services to the rest of the EU and much euro-denominated business may over time move to the continent.”

While the IMF maintained a “broadly positive” UK growth forecast of 2 per cent in 2016, and 2.25 per cent in the medium term, it warned this remained subject to risks including the EU referendum and high levels of household debt.

It added the number of commercial real estate transactions has dropped 40 per cent in the first quarter, which it attributed to uncertainty over a potential Brexit.

The comments represent the latest warnings from the IMF of the potential risks associated with the UK’s vote on EU membership.

The organisation flagged concerns around the referendum in February, and last month stated that a vote to leave would cause “severe regional and global damage”.

Yesterday, the Bank of England slashed forecasts for the UK’s growth, warning a vote to leave could “materially alter the outlook for output”.

It added: “There are increasing signs that uncertainty associated with the EU referendum has begun to weigh on activity”.