David Cameron's EU referendum puts the UK's economic recovery at risk, IMF warns

Christine Lagarde said she 'very much hopes' voters opt to remain in the EU

David Cameron has pledged to hold the EU referendum before the end of 2017 (PA)

Uncertainty over Britain's membership of the European Union is putting the UK's economic recovery at risk, the International Monetary Fund has warned.

In her annual report on the performance of the UK economy, IMF managing director Christine Lagarde suggested the EU referendum should be held as soon as possible as she stated her strong view that Britain votes to remain in the 28-state bloc.

Asked about when she hoped to see the referendum held, Ms Lagarde said: "certainty is always better than uncertainty".

She said the UK economy had made "considerable progress" since the 2008 financial crash, but warned there remained "uncertainties" which endangered the UK's economic recovery over the next few years.

Her report stated: "The presumed recovery of productivity growth to nearer its historical average rate, which is essential to ensure that the growth of output and incomes remains solid, may fail to materialise.

"In addition, uncertainty associated with the outcome of the planned referendum on EU membership could weigh on the outlook."

At a press conference after the publication of the report, Ms Lagarde said: "On a personal basis I am very, very much hopeful that the UK stays within the EU."

She announced that the IMF will produce a report in May next year assessing the consequences of Britain leaving the EU.

Last week the Prime Minister admitted he had given up hope of securing a deal this month, meaning an agreement will not be signed before February.

The date of the EU referendum is now unlikely to be held before next autumn at the earliest because the Government must give four months' notice and will not set a date before securing a deal with EU leaders.