No Deal would impose a major hit on the economy, Mark Carney warned today – and there is a one in three chance the country goes into recession even with an agreement.
The Bank of England governor delivered his latest chilling warning as he insisted the risk of a chaotic departure from the EU was already weighing heavily.
Failure to secure an agreement would cause the Pound to tumble even further, push inflation up, and heighten even further the danger that UK plc goes into the red, Mr Carney said.
He also ridiculed claims that the country would benefit from certainty that No Deal is happening, saying it would just ‘crystalise a bad economic outcome’.
The grim assessment – which is likely to cause fury among Eurosceptics – comes as Boris Johnson engages in a brutal game of chicken with the EU over Brexit.
The PM has vowed to take the UK out of the bloc by the end of October come what may, and said there will be no more negotiations unless Brussels agrees to ditch the hated Irish backstop.
The Bank of England governor delivered his latest chilling warning as he insisted the risk of a chaotic departure from the EU was already weighing heavily on the economy
The government today unveiled a £2.1billion warchest to prepare for No Deal.
But Irish PM Leo Varadkar has insisted he will not be ‘bullied’ by the combative from Mr Johnson.
The Bank kept interest rates on hold today, and gave forecasts based on a deal being secured with the EU before Halloween.
Treasury minister says Brexit will ‘hopefully’ happen by Halloween
A Treasury minister raised eyebrows today by saying Brexit will ‘hopefully’ be done by October 31.
Chief Secretary Rishi Sunak adopted a considerably softer tone than Boris Johnson, who has declared the UK will leave the EU by the deadline ‘come what may’.
Interviewed on BBC Radio 4’s Today programme about a major boost in No Deal spending, Mr Sunak said: ‘A lot of the money we are spending is going to go on things that would need to spend anyway because we are leaving the EU.
‘That means we’re going to be leaving the single market and the customs union, so of course that does mean changes to how we trade with Europe.’
He added: ‘At some point we will be leaving the European Union – hopefully by the end of October is our clear desire – so we would at some point have to do that campaign to get traders ready for the changes they’ll have to do.’
Mr Sunak tried to toughen up his stance later, telling LBC radio the government’s position on Brexit was ‘crystal clear’ and the UK would leave by Halloween ‘no ifs, no buts’.
But Mr Carney made his view of No Deal clear in a press conference, saying there would be an ‘instantaneous shock’.
‘In the event of No Deal, no-transition Brexit, sterling would likely fall, the risk premiums on UK assets would rise and volatility would spike higher,’ he said.
‘Similarly preparations by governments and businesses for no deal are vital to reduce the potentially damaging transition costs to a WTO [World Trade Organisation] relationship with the EU.
‘But those preparations cannot eliminate the fundamental economic adjustments to a new trading arrangement that a no-deal Brexit would entail.’
Mr Carney said it would ‘take some time’ for the economy to adjust to the new circumstances as it was ‘orientated largely to Europe to other economies’.
In forecasts based on a ‘smooth’ Brexit scenario, the Bank said economic growth in the second quarter would be flat, down from 0.5 per cent in the first three months.
It blamed an unwinding of Brexit contingency from the run-up to the last Brexit deadline in March, as well as a higher probability of No Deal and worries over a trade war between the US and China.
The bank is now forecasting growth this year and next of 1.3 per cent, down from 1.5 per cent and 1.6 per cent respectively.
Its forecasts also indicated that the country could also be slipping into recession early next year – suggesting there is a one-in-three chance of that happening.
‘Global trade tensions have intensified, global activity has remained soft and the perceived likelihood of a no-deal Brexit has increased significantly,’ Mr Carney said.
Carney said concerns over No Deal had already caused a ‘marked depreciation’ of the Pound.
The grim assessment – which is likely to cause fury among Eurosceptics – comes as Boris Johnson (pictured at a police board meeting last night) engages in a brutal game of chicken with the EU over Brexit