Washington:The International Monetary Fund (IMF) has urged Britain and the European Union (EU) to reduce the risks in the wake of Britain's decision to exit the bloc. "At this point, policy-makers, both in the UK and in Europe, are holding that level of uncertainty in their hands and how they come out in the next few days is really going to drive the direction in which risk will go," IMF Managing Director Christine Lagarde told a forum on Sunday at the Aspen Ideas Festival in Colorado. Following a decision to exit the EU, Britain would need to negotiate the terms of its withdrawal and a new relationship with the EU, Xinhua news agency reported. Lagarde said the IMF "will continue to encourage the parties involved to actually proceed with this transition in the most efficient, predictable way in order to reduce the level of uncertainty", which will determine the level of future risks. The IMF has continued to monitor the development closely and stood ready to support its member countries as needed, Lagarde added. In a statement released on Friday in the wake of Britain's referendum, the IMF chief urged Britain and the EU authorities to work collaboratively to "ensure a smooth transition to a new economic relationship between the UK and the EU", including by clarifying the procedures and broad objectives that will guide the process. The IMF had warned before the referendum that the British economy could shrink to 0.8 per cent in 2017 if it leaves the EU. Spill over from the British exit would be felt mostly by EU countries that have close trade and investment links with the country, including Ireland, Cyprus, Malta, the Netherlands and Belgium, according to a report released by the IMF earlier this month.