Bank of England head warns of 'shock' if no-deal Brexit

Lloyd Doyle
February 14, 2019

An escalation of America's trade war would wipe out much of Britain's growth over the next three years, Mark Carney said yesterday as he warned that "deglobalisation" and China posed the biggest threats to the world economy.

With more than a month to go until Britain's scheduled departure from the European Union, the Bank of England governor said: "It is in the interests of everyone, arguably everywhere. that a Brexit solution that works for all is found in the weeks ahead".

Brexiteer and Chairman of the European Research Group (ERG) Jacob Rees-Mogg criticised Mr Carney in November after the governor claimed that a clean, no deal, Brexit would result in the United Kingdom experiencing a massive fall in GDP and a sharp rise in unemployment, despite leaked Bank of England staff minutes revealing that such predictions could be "misleading" and "against public interest".

"If there's a shock, which... a no-deal transition Brexit would be, it would be a negative shock, then that further increases the possibility of negative quarters".

"That's part of the necessary adjustment mechanism but it is not a step to prosperity".

Last Thursday the BoE slashed growth forecast to its weakest in 10-years, growth forecast was cut to 1.2%, its lowest since 2009 when the United Kingdom hit a financial crisis followed by a recession. "The world is in a delicate equilibrium".

Britain, which has suffered sharp falls in business investment amid uncertainty around Brexit, could be seen as a "leading indicator" of a reversal of globalisation.

His globalisation section included one of his few passing remarks about Brexit, where he said: "Trade tensions overseas and Brexit debates at home are manifestations of fundamental pressures to reorder globalisation".

Mr Carney also said that slowing global growth has been hampered by "rising trade tensions and growing policy uncertainty", pointing to the trade dispute between the USA and China.

"While there are pockets of risk and global growth is still decelerating, the combination of the policy response and the state of the current imbalances in advanced economies suggest that global growth is more likely than not to stabilize eventually around its new, modest trend".

Carney added that "it isn't easy to win a trade war", referring to remarks made by U.S. President Donald Trump in March a year ago that trade wars were "good, and easy to win".

Other reports by Iphone Fresh

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