IMF delivers ‘tough love’ to UK on Brexit vote

Jessica Hartogs, Special to CNBC.com
Lagarde warns on Brexit
Lagarde warns on Brexit

The head of the International Monetary Fund (IMF) has warned that the IMF cannot "see anything positive in a vote for the U.K. to exit the EU," and that a Brexit vote — Britain exiting the European Union (EU) — could cause a sharp drop in investments.

Christine Lagarde, speaking at the Treasury in London on Friday after a meeting with U.K. Chancellor George Osborne, said a vote to leave the EU would "precipitate a protracted period of heightened uncertainty." Lagarde's remarks coincided with the release of an IMF report by a team of economists assessing the state of the UK economy.

Lagarde was careful to state that the IMF was not making a statement on political grounds, but rather had consulted with a wide range of IMF economists and had not heard a single view that a Brexit outcome would be positive for the UK.

The Brexit vote would be "costly in the long run even after uncertainty has been resolved," said Lagarde, adding the hit to the U.K. would range from "pretty bad to very, very bad."

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"What will the world be like after?" questioned Lagarde, if the U.K. votes to leave the 28-member bloc.

Lagarde said interest rates could rise sharply after a leave vote, but if the U.K. decided to remain in the EU, "we would expect (a) growth rebound."

The IMF managing director said another report would be released around June 16 with more exact estimates of the cost of the Brexit hit to the U.K. economy .

The referendum vote is scheduled for June 23.

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Friday's IMF report comes a day after the Bank of England said a vote to leave the EU could lead to another recession.

Lagarde concluded by stating that the IMF was saying things "as they see them" and delivering "tough love" to the UK.

Norman Lamont, a former U.K. chancellor of the exchequer who is now a leader in the campaign to leave the EU, was unimpressed.

'This daily avalanche of institutional propaganda is becoming ludicrous and pitiful. Important institutions are being politicized and used to make blood-curdling forecasts," he said in a statement emailed to CNBC in response to Lagarde's comments.

"There are plenty of respected individual economists, plenty of respected professional investors, and plenty of entrepreneurs who take a very different view from Christine Lagarde and who have probably been better at foreseeing the future than the IMF," Lamont added.

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—With contribution from CNBC's Katy Barnato.