Brexit fallout: UK economy to be hit if no trade deal
London — Britain’s economy will grow more slowly in the short term if the country fails to secure a future trading deal with the EU after Brexit, Bank of England (BoE) governor Mark Carney said on Sunday.
Asked in an interview with ITV television if Britain’s economy would take a hit if there is no Brexit deal, Carney said: "In the short term, without question, if we have materially less access [to the EU’s single market] than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth."
British business investment should be booming now, given the strength of the world economy and other factors, but it was just growing instead. This is because of the uncertainty about the outcome of the Brexit negotiations, he said.
The BoE on Thursday raised interest rates for the first time since 2007, before the start of the global financial crisis, but sterling fell sharply as the central bank said it expected only "very gradual" rate rises ahead.
Britain’s economy has slowed sharply in 2017 following the 2016 Brexit vote, but the BoE decided to raise rates in part because it believes that Brexit will create more inflation pressure due to lower migration and weaker investment.
Carney said it was possible that in the event of a bad Brexit deal, the BoE would be unable to cut rates in the future because of that inflationary pressure.
Meanwhile, Confederation of British Industry president Paul Drechsler will appeal for a "single, clear strategy" in an address on Monday at the annual conference in London. He will not shy away from criticism of Prime Minister Theresa May, with a stringent rebuke for her "episodic approach" to negotiating Brexit, according to e-mailed excerpts of his planned remarks.