Bank of England Governor Says Britain Worse Off After Brexit, Mocks Boris Johnson — Expect weaker real income growth

‘Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption,’ the Bank of England Governor said in his Mansion House speech

  • Ben Chu Economics Editor, The Independent

The Bank of England‘s Governor, Mark Carney, has spelled out that in the Bank’s view Brexit will make Britain worse off than otherwise and also appeared to take an indirect swipe at the optimistic view of Boris Johnson and others that the UK can “have its cake and eat it” after we leave the European Union.

In his Mansion House speech on Tuesday morning Mr Carney said that “weaker real income growth [is] likely to accompany the transition to new trading arrangements with the EU”.

This assumption was embedded in the Bank’s latest official forecasts which showed the level of UK GDP in 2019 relative to its pre-June referendum forecasts lower by around 1.5 per cent, or £30bn in today’s money.

But this is the most explicit the Governor, who has been attacked by some hardline Brexiteers for supposedly “talking down” the economy, has been on the issue.

Referring to the slump in sterling since last June’s vote, Mr Carney told his audience that “markets have already anticipated some of the adjustment” and suggested that without a post-2019 transition process for the UK, which would retain single market and customs union membership for the UK for a period, the situation could deteriorate further and cause some firms to move operations out of Britain.

“Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans. Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption,” he said.

In an interview with The Sun last September Mr Johnson, the Foreign Secretary and leading light of the Leave campaign, said of Brexit Britain: “Our policy is having our cake and eating it”.

Mr Johnson was referring to his belief that the UK could end EU freedom of movement while also keeping UK trade with the Continent, our biggest export market, as free as before.

The Governor’s references to a transition arrangement echoes the call, made earlier at the Mansion House, from the Chancellor, Philip Hammond for “mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges”.

This represents a reassertion of the Treasury in Brexit policymaking in the wake of the shock general election result, which deprived the Conservatives of their Parliamentary majority.

Mr Hammond had been sidelined by Downing Street in the campaign and Ms May had resurrected an earlier threat to walk away from the Brexit negotiations with no deal at all – a prospect that fills most business organisations with horror due to the profound shock this would inflict on the economy.

The Governor also said that, in his view, it was not yet the right time to raise interest rates, despite inflation hitting 2.9 per cent in May.

His comments sent sterling down 0.3 per cent against the dollar to $1.2694.

Three out of eight members of the Bank’s rate-setting Monetary Policy Committee voted to increase rates from 0.25 per cent to 0.5 per cent last week, the largest vote for an increase in the cost of borrowing since 2011.

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From The Telegraph
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In a thinly veiled attack on the Foreign Secretary, he said: “Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.”

During the referendum campaign Mr Johnson claimed the Britain could “have its cake and eat it” after it leaves the European Union.

It came as Philip Hammond said immigration to Britain will be managed but not “shut down” after a “jobs first” Brexit

Britain's Chancellor of the Exchequer Philip Hammond
Britain’s Chancellor of the Exchequer Philip Hammond CREDIT: PAUL ELLIS/AFP

The Chancellor also signalled the UK would seek to maintain the “frictionless” border arrangements of the European Union’s customs union for an “implementation period” after leaving the bloc.

He stressed that Britain would leave the EU “in a way that prioritises British jobs and underpins Britain’s prosperity”.

The address will be interpreted as a fresh marker in an internal Cabinet battle over Brexit.

Unite for Europe march in London
Unite for Europe march in London CREDIT: REUTERS/PETER NICHOLLS

Mr Hammond is understood to favour an approach that puts businesses first while colleagues, including Theresa May, have made immigration controls a red line for negotiations.

Read the rest:

http://www.telegraph.co.uk/news/2017/06/20/mark-carney-mocks-boris-johnson-warns-brexit-unlikely-land-cake/

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One Response to “Bank of England Governor Says Britain Worse Off After Brexit, Mocks Boris Johnson — Expect weaker real income growth”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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