Bank of England: No-deal Brexit would shrink the UK economy by 5.5%

The Bank of England governor, Mark Carney, warned the UK lawmakers against the no-deal Brexit, as it would shrink the country’s economy by 5.5%. Carney, while addressing the MPs over Brexit’s worst-case scenario on Wednesday, said that owing to the preparatory measures undertaken beforehand, the impact of no-deal would be less damaging than predicted last year, but it would still be severe.

In November 2018, the BoE published a list of projections related to UK’s withdrawal from the 27 nation bloc without a deal. The bank earlier forecasted that the no-deal divorce would cost the country about 8% slump in its economy. The bank had also earlier predicted that no-deal would lead to a rise in the level of unemployment to 7.5 percent and inflation to 6.5 percent. Carney mentioned that now there would be a slight change in the figures as unemployment could hit up to 7 percent and inflation 5.25 percent.

Britain’s deadline to leave the European Union, as of now, stands as of October 31. Carney proposed that delay in Britain’s exit would be a saner option to go for in order to save the economy. If the bill proposed by UK MPs becomes a law, the prime minister Boris Johnson would be forced to delay the Brexit deadline from 31 October to the end of January unless he comes up with a deal with EU.

Carney shared the economic insights with the MPs ahead of a hearing with the Treasury Select Committee on Wednesday afternoon.

He said, “Improvements in preparedness mean that the appropriate set of assumptions to underpin a worst-case scenario would now be less severe than those used in the disorderly scenario published in November.”

He told MPs that the BoE’s revised predictions, dropped a bit due to alignment them with the preparations such as “border infrastructure” at Calais, putting customs checks on hold for some time and UK firms getting EU certification for their products.

Carney added: “There’s more preparation that can be done, both in terms of public preparation and preparation by businesses.“It stands to reason that if there were more time, more would be accomplished.”

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