BoE’s Mark Carney Warns Against a No Deal Brexit: “There Will Be Pain”

Source: Bank of England/Flickr

Today, Mark Carney, the Bank of England governor, warned regarding “pain” for the British economy in case of a hard Brexit, with no transition or longer-term trade deal settled between the European Union and the United Kingdom on trade.

Talking at the stress tests of the financial system of the Bank, Carney said that banks in the United Kingdom would be able to resist even the most disorganised Brexit process without halting lending to the economy. However, he restated his plea for negotiators to dodge that situation.

A transition period for financial services firms of around 18 months to two years has been called for by Carney. He added that the latter was a “good estimate” of what the banks required.

He added that the process of reorienting financial services trade between the European Union and the United Kingdom would be made “considerably easier by a material transition period,” he said. “We’re looking to catalyst that action.”

Carney said that a “no deal” Brexit scenario would prompt an “economic impact on households and businesses.”

He added: “There will be some pain associated with that. This is about minimising that, and dampening that.”

Today, the financial policy committee of the Bank warned that while a disorganised Brexit on its own would not thwart the global financial system, a simultaneous recession globally could produce “more severe conditions than in the stress test.”

The Bank of England has made it more clear over the past year that it thinks, in line with the majority of economists, that a worst case “no deal” scenario would produce a significant slump in economic activity.

Sam Woods, the deputy governor, has made the most explicit comments asking regulators to agree to transitional arrangements by Christmas. After that point, firms will begin implementing contingency plans, possibly involving the relocation of jobs out of the United Kingdom.