The Governor of the Bank of England, Mark Carney, has reportedly told the Prime Minister and the Cabinet that a no-deal Brexit next year could risk repeating the same level of financial hardship as the 2008-09 Financial Crash, with house prices and unemployment the main areas hit.
Mr Carney was speaking at a special cabinet meeting last Thursday, in which he suggested that a lack of trade agreements would generate confusion for businesses which would scare investors away, thus weakening the Pound, slowing the economy, and raising unemployment. With higher living costs, spending priorities would shift, and house prices is one area expected to bear the brunt of the problem, losing up 35% value and forcing mortgage rates up far higher.
A senior government minister argued that Mr Carney was only explaining the worst-case scenario, and not one that was likely given the positive talks with the EU recently, but following the news about Carney’s meeting, the value of the Pound dropped slightly against the Euro.
Yesterday, Christine Lagarde, the Managing Director of the IMF (International Monetary Fund) said in a televised press conference that all Brexit scenarios will cost the UK.
Christine Lagarde: No-deal #Brexit would lead to "reduced growth, increased deficit, depreciation of the currency"— BBC News (UK) (@BBCNews) September 17, 2018
IMF chief warns of grave consequences if Britain leaves EU without a deal https://t.co/HKfrsQyRrF pic.twitter.com/sWWd3Y8RHq
Not everyone is onboard with the Brexit concerns however. Conservative MP and Brexiteer Jacob Rees-Mogg has been highly critical of Mark Carney, labelling him the "high priest of Project Fear” for his pessimistic comments about Brexit, and Mr Rees-Mogg also opposing his plan to stay as the Governor of the Bank of England until 2020 to oversee Brexit. Fellow Brexit advocate Sir Bernard Jenkin MP has also accused the boss of Jaguar Land Rover, Professor Dr Ralf Speth, of ‘scaremongering’, after Speth’s speech to a summit in Birmingham attended by the Prime Minister stated that Brexit could cost JLR over £1.2 billion per year.
BCC downgrades UK economic forecast
The fear of a no-deal is restricting UK economic growth even before the current EU deals expire. New data from the British Chambers of Commerce has been released this week, with their figures downgrading UK growth for 2018 from 1.3% to 1.1%, and reducing the forecast for 2019 from 1.4% to 1.3%. These figures are a far cry from the Office for National Statistics reports that the UK economy grew by 1.7% last year, and in a period of global economic growth it’s concerning to investors that the United Kingdom is going the opposite direction.
Dr Adam Marshall, the Director General of the BCC, said: “The drag effect on investment and trade would intensify in the event of a ‘messy’ and disorderly Brexit. Businesses need the Brexit negotiations to deliver clarity, precision and results at pace over the coming weeks.
“Our forecast makes clear that there is no room for ministers to kick the can further on the UK’s future immigration policy. Businesses need to know, now, that they can hire the people they need after Brexit - without being tied up in reams of new costly red tape.”
The consultancy firm KPGM offered similar figures to the Chambers of Commerce, adding in that consumer spending had dropped by 0.7% year on year and business investment had dropped by 2.6% in the same period.