Mark Carney warns politicians to find a way out of the Brexit impasse because no deal would be another blow to a GLOBAL economy already suffering from trade wars and protectionism
- Bank of England Governor warned business investment in Britain was down 3.7%
- He said it was ‘in the interests of everyone, everywhere’ for there to be a deal
- Carney said the world economy was already suffering from US-China trade war
- Said protectionist governments and inward-looking economies were also issues
Mark Carney warned politicians to find a way out of the Brexit impasse today because no deal would be another blow to the ailing world economy.
The Bank of England Governor said an amicable UK-EU divorce was ‘in the interests of everyone, everywhere’ amid rising global turbulence.
Mr Carney said the US-China trade war, rising levels of protectionism and a trend against globalised economies were all buffeting the economy.
In a major speech in London, he also warned business investment in the UK had dropped 3.7 per cent in the past amid Brexit uncertainty.
The Governor has frequently been the target of Brexiteer anger for dire warnings about the impact leaving the EU without a deal might have on the economy.
Mark Carney (pictured today in London) warned politicians to find a way out of the Brexit impasse today because no deal would be another blow to the ailing world economy
With just 45 days until exit day, Mr Carney said: ‘It is in the interests of everyone, arguably everywhere … that a Brexit solution that works for all is found in the weeks ahead.’
In a speech at Frobisher Hall in London, Mr Carney told City figures that business investment in the UK ‘has fallen 3.7 per cent over the past year despite the ongoing expansion, high business profitability and accommodative financial conditions’.
‘With fundamental uncertainty about future market access, UK investment hasn’t grown since the referendum was called and has dramatically underperformed both history and peers.’
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He described Brexit as an ‘acid test’ of whether a way can be found to broaden the benefits of economic ‘openness while enhancing democratic accountability’.
NO DEAL DOOMSDAY SCENARIO: BANK OF ENGLAND CHIEF WARNS OF ECONOMIC CATASTROPHE
Bank of England chief Mark Carney has warned the pound would crash, inflation will soar and interest rates would have to rise in the event of a no deal disorderly Brexit.
The Bank Governor said the impact of Brexit would depend entirely on whether there was a deal but said he had a duty to spell out what might happen.
The figures are contained in a ‘worst case scenario’ published by the Bank which suggest that under a chaotic exit from the EU without a deal:
- The size of the economy could plunge by 8 per cent in less than a year – further and faster than the financial crisis of 2008
- At the same time, the unemployment rate would rise 7.5 per cent, meaning hundreds of thousands losing their jobs
- Inflation would surge 6.5 per cent, sending prices in the shops surging House prices could plunge 30 per cent, while commercial property prices are set to fall 48 per cent
- The pound would fall by 25 per cent to less than parity against both the US dollar and the euro
But he faced a backlash from Eurosceptic MPs, who accused him of mobilising ‘Project Hysteria’ in support of Mrs May’s deal.
Mr Carney said trade tensions and Brexit are ‘manifestations of fundamental pressures to reorder globalisation’ and that Britain’s divorce from the EU was a test in trade uncertainty, which if prolonged, could undermine global expansion.
‘It is possible that new rules of the road will be developed for a more inclusive and resilient global economy.
‘At the same time, there is a risk that countries turn inwards, undercutting growth and prosperity for all.
‘Concerns over this possibility are already impairing investment, jobs and growth, creating a dynamic that could become self-fulfilling.’
His comments come days after the central bank slashed its growth forecast for the UK economy and warned about the mounting risk of a recession in the event of a no-deal Brexit.
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 US and China.
‘Global economic policy uncertainty is at record highs. And protectionist rhetoric is becoming reality, with the United States raising tariffs on a range of imports from its main trading partners, and some retaliating in kind.
‘If all measures contemplated are implemented, average US tariffs will reach rates not seen in half a century.’
He added that ‘contrary to what you might have heard, it isn’t easy to win a trade war’.
‘The larger and the more permanent the disruption to global trade – the greater the de-globalisation -the greater the reduction in both activity and supply capacity of economies.’
The Bank of England Governor said an amicable UK-EU divorce was ‘in the interests of everyone, everywhere’ amid rising global turbulence (file image of the Bank’s HQ at Threadneedle Street)
The Bank believes an increase of 10 percentage points on import tariffs charged by the US would hit the county’s gross domestic product (GDP) by 2.5 per cent and reduce world output by 1 per cent.
Meanwhile a downturn in the Chinese economy, he said, ‘would test the resilience’ of other countries.
The Bank estimates that a 3 per cent drop in Chinese GDP would take 1 per cent off global activity, including 0.5 per cent each for UK, US and eurozone GDP.
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