IMF warns of disruptive effects Brexit might have

The UK leaving the European Union would have multiple negative consequences for the British economy and financial markets, the International Monetary Fund warned on Friday.

It could lead to a “protracted period of heightened uncertainty,” the IMF said in its annual Article IV consultation with the United Kingdom, its yearly review of the state of the country's economy and finances.

Brexit might set off volatility in financial markets, resulting in "sharp" drops in home and equity prices, impacting economic growth and eroding London's standing as a financial centre, the Washington-based lender said.

Indeed, the uncertainty surrounding the 23 June referendum was already affecting investment and hiring decisions, the IMF added.

Renegotiations in the aftermath of Brexit “could well remain unresolved for years, weighing heavily on investment and economic sentiment during the interim and depressing output.”

“In addition, volatility in key financial markets would likely rise as markets adjust to new circumstances.”

IMF managing director Christine Lagarde's warnings came during her visit to London and followed similar conclusions from the Treasury, although the Prime Minister and some ex head of MI5 and MI6 had placed greater emphasis on the risk that Brexit might trigger a slow unravelling of the EU's framework.

If investors came to increasingly anticipate Brexit that could lead to “sharp drops in equity and house prices, increased borrowing costs for households and businesses, and even a sudden stop of investment inflows into key sectors such as commercial real estate and finance.”