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IMF: UK should seek longer Brexit transition due to coronavirus pandemic

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Lianna Brinded
·Head of Yahoo Finance UK
·2-min read
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An exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020 in Washington, DC. - The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said on March 27, 2020. Photo: OLIVIER DOULIERY/AFP via Getty Images
An exterior view of the building of the International Monetary Fund in Washington, DC, US. (Olivier Douliery/AFP via Getty Images)

The International Monetary Fund (IMF) has urged Britain to ask for an extension to its post-Brexit transition due to the unprecedented impact the coronavirus pandemic is having on the economy.

Head of the IMF, Kristalina Georgieva, told BBC radio that "it is tough as it is. Let's not make it any tougher.”

"My advice would be to seek ways in which this element of uncertainty is reduced in the interests of everybody, of the UK, of the EU, the whole world," she added.

The transition period for Britain leaving the European Union is due to end on 31 December this year. During this period, Britain was set to negotiate trade agreements with the 27-nation bloc as well as a number of other measures. However, no agreement has been made by this time, there will be a gulf of rules and tariffs between the parties.

Read more: European stocks climb as Germany plots path out of lockdown

The coronavirus pandemic has significantly changed everything as leaders across the globe battle COVID-19 from spreading as well as helping navigate the damage to the economy.

Earlier this week, the IMF said the global pandemic is likely to cause the worst recession since the Great Depression of the 1930s and do lasting damage to the global economy.

Also this week, the UK’s independent budget watchdog, the Office for Budget Responsibility (OBR), said that the UK economy could contract by as much as 35% in the second quarter of 2020 if the current lockdown persists for three months. In this scenario, unemployment is expected to rise to 10%, compared to 3.9% at the start of the year. That would equate to 2 million extra people out of work.

The UK government has already unleashed a set of financial measures to help tackle the pandemic — worth 15% of GDP. Meanwhile, the president of the European Commission has called for a €1tn (£871bn, $1.08tn) “new Marshall plan” to revive European economies when they start to get a grip on the coronavirus.

The European Union published its “joint European roadmap” for lifting COVID-19 containment measures on Wednesday. It has called for member states to co-ordinate plans for easing restrictions, with fears lifting lockdowns too early and countries’ divergent approaches could undermine global efforts to tackle to virus.