Mark Carney, the governor of Bank of England, gave a heads up to his country of approaching recession which seems inevitable with deal or without a deal. Amid Britain’s slower economic growth, which is expected to drop further, the central bank cuts the growth forecasts for 2019 and 2020.
In May the bank made projections that the UK economy would grow at the rate of 1.5% in 2019 and 1.6% in 2020. But observing the slump in the economy, owing to Britain’s departure from the European Union on 31 October, the bank brought down its forecast for both the years to 1.3%. But it kept its interest rates unchanged at 0.75%.
The worst-hit sector of the economy is manufacturing as it touched the lowest level for the first time in the past seven years.
Besides Brexit turmoil, the ongoing trade war between US and China was also blamed for bringing the downturn in the economy.
Announcing the economic predictions on Thursday, Carney said that though the country was now prepared for the worst but there could be a slight possibility that the newly elected prime minister, Boris Johnson, would be able to reach a deal with the EU. A deal would definitely help in stabilizing Britain’s economy and lifting the sharply falling pound.
Mr Carney said: “The country has to be prepared for that contingency, and the financial sector is prepared for that contingency. The core of the financial sector is ready for No Deal.”
He added, “If, as assumed, Brexit proceeds smoothly to some form of deal, market interest rates would likely rise and the sterling exchange rate would likely appreciate.”
UK’s multiple business lobbies have raised their concern over exiting the bloc all together as they want the benefits of the single market to continue ranging from zero custom, easy flow of goods, less permissions and legalities to smooth transaction of money.
The chances of no-Brexit appear very slim, for it being an official government policy now. On Wednesday, Sajid Javid, the chancellor for no-deal preparations, announced the government’s plan to put in funds worth £2.1 billion, in order to boost the business and trade market, which is otherwise slowing down.