BoE foresees ‘less severe’ impact of no-deal Brexit

6 September, 2019 12:00 AM printer

LONDON: The Bank of England believes the impact of a no-deal Brexit on the UK economy is "less severe" than previously thought owing to better preparedness, governor Mark Carney said Wednesday.

In a letter to the chair of a cross-panel committee of British MPs, Carney 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", reports AFP.

Rather than a a gross domestic product shortfall of 8.0 percent, a no-deal Brexit would now result in "an initial peak-to-trough decline in GDP of 5.5 percent", Carney said.

Unemployment would meanwhile surge to 7.0 percent rather than 7.5 percent, up from a current 45-year low of 3.8 percent.

Inflation would still soar to 5.25 percent, but less than a previous estimate of 6.5 percent.

Carney's update comes after Prime Minister Boris Johnson on Wednesday proposed holding a general election on October 15 should lawmakers force him to seek a three-month Brexit extension from Brussels rather than carrying out a no-deal exit on October 31.

Carney's letter sent to John Mann, an MP for the main opposition Labour party, was dated Tuesday, one day ahead of the BoE chief's appearance before the cross-party Treasury Committee.

"There's more preparation that can be done, both in terms of public preparation and preparation by businesses," Carney told the panel of lawmakers.

"It stands to reason that if there were more time, more would be accomplished."

He meanwhile confirmed that the weak state of the UK economy, which stands close to recession.

"If you look through the underlying trend, our judgement is that the economy is growing very weakly, positive but very close to zero."