IMF, Christine Lagarde.jpg
Photograph: Photo by Adam Tinworth, used under CC BY-ND

Britain faces long-term economic uncertainty and volatility in financial markets if it votes to leave the European Union in a referendum on June 23, the International Monetary Fund warned on Friday.

A British exit from the EU, or Brexit, carries "a significant downside risk" and the prospect of it happening is an international issue that causes "anxiety around the world," said Christine Lagarde, the IMF's managing director.

An IMF report on Britain's economic outlook said a Brexit would "precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output."

"The long-run effects on UK output and incomes would also likely be negative and substantial," the report said.

Vote Leave campaigner Priti Patel, the government's employment minister, said the IMF was "talking down Britain" and wanted to "interfere in our democratic debate" ahead of the referendum.

"The IMF warned Britain it was playing with fire when it set out a plan to deal with the [budget] deficit," Patel said. "Now our economy is stronger than nearly every other major economy."

"Today, the IMF is talking down Britain because we want to take back control from Brussels," she said. "They were wrong then and they are wrong now."

But Chancellor of the Exchequer George Osborne backed the IMF's analysis, saying it had "put to rest the fallacy that's been peddled by those who say Britain will have more money for public services if we're not paying into the EU budget."

"The IMF are clear that even the prospect of a 'leave' vote is already having an impact on investment and hiring decisions, and weighing on economic growth in the UK," Osborne said in a statement.

"But the Fund are also clear that this could be a mere taste of things to come if we vote to leave," he said.

Osborne's Treasury ministry issued an analysis last month saying an average British household would lose 4,300 pounds (6,200 dollars) annually if Britain leaves the EU.

A report by the Organization for Economic Co-operation and Development (OECD) last month said a Brexit would cause an economic "shock" that would prompt a decline of 3 per cent in Britain's GDP by 2020.

Vote Leave dismissed the OECD report, saying it was based on "pessimistic assumptions about life outside the EU."

Osborne and Prime Minister David Cameron are campaigning for the Remain side ahead of the referendum.

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