No deal Brexit would have ‘big consequences’ for the UK economy, Bank of England governor Mark Carney warns
- Bank of England governor has risked wading into row over Brexit negotiations
- Mark Carney told MPs a no-deal outcome would have ‘big consequences’ for UK
- Hinted that Bank is making preparations for economic shock from no deal result
No-deal Brexit would have ‘big consequences’ for the UK economy, Mark Carney warned today.
The Bank of England governor risked wading into the raging row over negotiations with the EU as he gave evidence to MPs.
The chances of the UK crashing out of the bloc appear to have been rising as Theresa May struggles to hold the warring Tory party together.
The PM’s room for manoeuvre shrank further last night when she was forced to accept a Brexiteer amendment designed to kill off her Chequers plan.
Even if Mrs May manages to put together a blueprint that commands support in parliament, she will still have to persuade the EU.
Bank of England governor Mark Carney risked wading into the raging row over negotiations with the EU as he gave evidence to MPs (file picture)
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Mr Carney’s evidence to the Treasury committee was blighted with technical problems, as the live feed repeatedly failed.
He told the MPs that the Bank’s ‘job is to make sure we are as prepared as possible’.
Mr Carney said crashing out would prompt the Bank’s monetary policy committee to reassess its policies – hinting at more interest rates.
‘It would be a material event. I wouldn’t prejudge in which direction, though,’ Mr Carney said.
‘Speaking very narrowly about the financial services side, in the event of a no-deal scenario… there would be big economic consequences.
‘We might have a lot of idle bankers as there is not a lot of demand for their services.’
The chances of the UK crashing out of the bloc appear to have been rising as Theresa May (pictured at Farnborough yesterday) struggles to hold the warring Tory party together
So what would happen if we just walked away?
Leaving without a deal would mean an immediate Brexit on March 29 after tearing up a 21-month transition agreement. This included giving £39billion to the EU, which ministers would no longer have to pay, a House of Lords report claims.
The Chequers agreement effectively proposed keeping Britain in the single market for goods and agriculture to preserve ‘frictionless’ trade and protect the economy.
Customs checks on cross-Channel freight would cause havoc at ports, hitting food supplies and other goods.
Even Brexiteers admit to a big economic impact in the short term. Britain could waive customs checks on EU produce to free up backlogs, but would Brussels do the same?
All EU-UK trade in goods is free of tariffs in the single market.
Trade would revert to World Trade Organisation rules. The EU would charge import tariffs averaging 2-3 per cent on goods, but up to 60 per cent for some agricultural produce, damaging UK exporters.
We have a trade deficit with the EU of £71billion – they sell us more than we sell them – so the EU overall would lose out.
German cars and French agriculture would be worst hit, as would UK regions with large export industries. Tariffs could also mean price inflation. But UK trade with the EU is 13 per cent of GDP and falling compared to non-EU trade, which generates a surplus and is likely to grow. The outlook would be boosted by Britain’s ability to strike trade deals.
The UK would immediately have control over its borders and freedom to set migration policy on all EU migrants.
UK nationals would likely lose their right to live and work in the EU. There would be legal uncertainty for the 1.3million Britons living in the EU and the 3.7million EU nationals here.
CITY OF LONDON
Many firms have already made contingency plans for no deal, but there would probably be a significant degree of disruption and an economic hit.
Ministers would be likely to take an axe to tax and regulations to preserve the UK’s economic advantage.
Fears of planes not being able to fly appear far-fetched – unless the EU is determined to destroy both business and tourism. Rules to keep planes in the air are likely to be agreed. The EU has many deals with non-EU countries as part of its Open Skies regime.
Britain would be free from the edicts of the European Court of Justice in Luxembourg and all EU laws. Parliament would be sovereign.
FARMING & FISHING
THE UK would quit the Common Agricultural Policy, which gives farmers and landowners £3billion in subsidies. Ministers would come under pressure to continue a form of subsidy.
Northern Ireland would be outside the EU, with no arrangements on how to manage 300 crossing points on the 310-mile border.
The EU would want Ireland to impose customs and other checks to protect the bloc’s border – something it has said it will not do. No deal could blow a hole in the Good Friday Agreement, with pressure on all sides to find a compromise.
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