Not one to ever shy away from warning about a potential Brexit train wreck, yesterday Mark Carney, the Bank of England Governor gave his most dire forecast yet of possible outcomes a no-deal Brexit would have on the UK economy. In the BoE’s ‘worst-case scenario’ analysis, a disorderly Brexit would cost the UK nearly 11% of its national income over the next 5 years, nearly double unemployment to 7.5% as well as causing house prices to crash by nearly a third (commercial property prices could be even worse at nearly 50%), and sterling getting smashed to the tune of 25%. The figures, although startling, are not a million miles away from the government’s own analysis published earlier in the day, claiming the economy will be 10.5% smaller over the next 15 years in the event of a hard Brexit. If this worst-case scenario was to come to fruition, it would be the biggest slump since World War 2.
One of the main reasons for the doomsday warning was that according to the BoE, there is no precedent of a major advanced economy having such a cliff edge cut-off from a trade agreement that is as ‘deep and complex’ as the UK’s one with the EU. The corporate sector was highlighted as one area that was ‘not yet well equipped to cope with a ‘no deal’ Brexit’. One of the most worrying aspects was the warning from Carney that there was little the BoE can do in any worst-case scenario, ‘There is little monetary policy can do to offset the potentially significant hits to productivity and supply that Brexit could entail the future potential of this economy and its implications of jobs, real wages and wealth are not in the gift of central bankers’.
As you can imagine, not everyone is in the same boat as Carney and the BoE when it comes to the outlook for the UK’s future outside the EU. Never one to walk past a microphone without talking into it, Jacob Rees-Mogg has accused Carney of undermining the Bank of England's ‘independence and credibility’ after issuing the warning. He is quoted as saying ‘This is Project Hysteria. Before the referendum, we were threatened with the plague of frogs. Now they warn of the death of the first born. The Bank of England has gone from being discredited to being hysterical’ He goes on to say ‘I think it discredits the Governor – who is basically a failed second-rate Canadian politician who is talking down the pound, which I think is unprecedented’.