Bank of England governor Mark Carney has hit back at accusations that he is stirring fear about Brexit, warning that the UK would be hit by an “instantaneous” economic shockwave if it cannot strike a deal with the EU.
Carney said this morning it is “not helpful” to deny the challenges that a no-deal scenario would bring. He said there would not only be disruption at Britain’s borders, but such a situation would render a “substantial number” of businesses “no longer economic”.
The automotive sector, food and chemicals and transport industries would suffer most of all, he said.
“Restructuring an economy in terms of changing supply chains, retraining workers, shutting down plants that are no longer economic, starting up new ones that would be economic – that is very difficult.”
Carney was speaking to the BBC after the Bank of England yesterday said UK growth ground to a standstill in the second quarter of the year. This was due to the unwinding of Brexit stockpiling and car plant shutdowns. The BoE chose to leave interest rates unchanged at 0.75 per cent.
‘Consumer panic’ and chance of recession
Former Tory leader and hard Brexit-backing backbencher Iain Duncan Smith told the Telegraph yesterday that Carney’s comments should be taken with a “massive pinch of salt”.
However, it emerged hours later that Whitehall was bracing for potential “consumer panic”, increased risk of organised crime and a plummeting pound if there is a no-deal.
A leaked government slide which was shown to cabinet ministers showed the government’s worst-case scenarios in a no-deal, reported Sky News.
Chancellor Sajid Javid has announced an extra £2.1bn of public spending to increase the government’s ability to cope with such a scenario.
The BoE also warned yesterday that the economic damage could be so great that there is now about a 30 per cent chance of a recession at the start of next year.