The possibility of a no-deal Brexit is “uncomfortably high” and “highly undesirable”, Bank of England governor Mark Carney has told news agents. Mr Carney said the prospect of the UK leaving the EU without a deal was “a relatively unlikely possibility, but it is a possibility”. He said it was “absolutely in the interest” of the EU and UK to have a transition period. Critics poured scorn on the comments, calling them part of “Project Fear”. Mr Carney’s warning came ahead of Theresa May’s meeting with French President Emmanuel Macron at his summer retreat on a small island off the French Mediterranean coast.
The prime minister is cutting short a holiday in Italy as she continues to seek support among European leaders for her Brexit plans. The bank governor told the BBC that the financial system was robust and could withstand any post-Brexit shocks. “We have made sure that banks have the capital, the liquidity that they need and we have the contingency plans in place, ” he told the BBC’s Today program. “There is a very broad range of potential outcomes to these Brexit negotiations and we are entering a crucial phase.” The pound declined on the currency markets in the wake of Mr Carney’s comments, falling below the $1.30 mark, before recovering some ground.
Mr Carney said that if a no-deal Brexit were to happen, it would mean disruption to trade and economic activity, as well as higher prices for a period of time. “Our job in the Bank of England is to make sure that those things don’t happen. It’s relatively unlikely but it is a possibility. We don’t want to have people worrying that they can’t get their money out,” he said. Mr Carney added: “We’ve put the banks through the wringer to make sure that they have the capital. Whatever the shock could happen from, it could come from a no-deal Brexit, we’ve gone through all the risks of a no-deal Brexit.” However, he said that even with liquidity and capital, the banks could not solve all Brexit-related financial problems.
“There are a few things the EU government has to solve, ” he said. “The UK has taken all the steps, all the secondary legislation it needs to. The European authorities still have some steps they need to take. We’re having conversations and we expect those to be addressed.” Former work and pensions secretary Iain Duncan Smith, who backs Brexit, said: “There is no such thing as a no-deal, as the [World Trade Organization] is where the EU and the UK are already and as a rule-based organization, both sides would have to abide by those rules. He said the Treasury and the Bank of England had “struggled to understand how this would work,” adding: “No deal is the language of Project Fear.”
And economist Ruth Lea, adviser to the Arbuthnot Banking Group, tweeted that Mr Carney was crying wolf, and few people would listen. Meanwhile, General Sir Nick Carter, the new head of the armed forces, was asked on the Today program about reports that the army was being put on standby for a no-deal Brexit which could see troops help deliver food, medicines and fuel. He said: “There hasn’t been any request yet as far as I’m aware.” Pressed if there had been any discussions about a no-deal Brexit, the chief of the defence staff added: “The Armed Forces are always doing contingency planning but we’ve not been asked that specific question.”