Brexit: May warns of “no deal” amid party divisions

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British Prime Minister Theresa May has warned rebels in her party that they will face a no deal in Brexit negotiations if they failed to support her potential Brexit deal with the EU.

The United Kingdom is due to leave the EU on March 29 but there is, so far, no full exit agreement and some rebels in May’s Conservative Party have threatened to vote down a deal if she clinches one.

“I think that the alternative to that will be having no deal,” May told BBC TV.

The fate of May’s government and her Brexit plan is in doubt because it is unclear whether she could command the 320 votes she needs in the House of Commons, the lower house of the British parliament, to approve a deal.

Recent signals from Brussels have buoyed hopes that the United Kingdom and the EU can agree and approve a proper divorce agreement before the UK leaves on March 29, though the sides are still divided on about one fifth of the detail of a deal.

But many business chiefs and investors fear politics could scupper an agreement, thrusting the world’s fifth largest economy into a “no-deal” Brexit that they say would weaken the West, spook financial markets and block the arteries of trade.

Some critics have suggested another referendum be held if the deal failed to meet the people’s expectations.

Shrinking economy

Meanwhile, the International Monetary Fund says Britain’s economy will shrink if the country leaves the European Union next year without a Brexit deal and any deal will leave the country financially worse off than staying in.

The IMF said it expected Britain’s economy would grow by about 1.5 percent a year in 2018 and 2019 if a broad Brexit agreement was struck, compared with about 1.75 percent if it had stayed in.

Failure to get a deal would lead to a contraction, IMF Managing Director Christine Lagarde said.

A more disruptive departure will have a much worse outcome,” she said as the IMF presented its annual report on Britain’s economy.

Let me be clear, compared with today’s smooth single market, all the likely Brexit scenarios will have costs for the economy and to a lesser extent as well for the EU,” she said.

The larger the impediments to trade in the new relationship, the costlier it will be. This should be fairly obvious, but it seems that sometimes it is not.”

However, stronger-than-expected data last week showed the economy had its fastest growth in nearly a year, helped by the World Cup and hot summer weather.

British finance minister Philip Hammond, speaking alongside Lagarde, said the government had to heed the “clear warnings” from the IMF of a no-deal Brexit