A no-deal Brexit could damage a “substantial” number of businesses and would hit customers at the tills, the governor of the Bank of England has warned.
With 90 days until the UK is due to leave the European Union, Mark Carney said crashing out without a deal would have a very different effect on the economy than the EU referendum result did.
“Instantly, you have these supply – not just disruptions, so I’m not just talking about the issues at the ports, which are real – but you actually have businesses that are no longer economic,” he told BBC Radio 4’s Today programme.
“It’s potentially a substantial number and that has to be taken into account.”
Boris Johnson – who replaced Theresa May as prime minister last week – has vowed to pull the UK out of the EU “do or die” on October 31, saying he would leave without a deal.
But on Friday, Carney – who is due to step down as governor in January – warned that leaving the EU on WTO terms would also lead to a spike in prices for consumers.
“It is reasonable to expect – the markets are absolutely clear on this – that in the event of a no deal the exchange rate would go down for a period of time,” he said.
“And in the area of the economy where that instantly translates into prices is in the forecourt of the petrol station, and in food and veg.”
Carney also used the interview to hit back at suggestions from Brexiteers that he was reviving ‘Project Fear’ with his no-deal predictions after Iain Duncan Smith, a former Tory leader, said they should be taken with “a massive pinch of salt”.
“It is not helpful to downplay the challenges in terms of logistics – whether they’re at the ports, whether they’re in the plumbing of the financial system, whether they have to do with personal data, and on and on,” he said.
“It’s not helpful to downplay those issues… It is also not helpful to deny that shifting from the most integrated economic relationship in the which is being a member of the European Union to a new relationship that potentially is just a WTO relationship, that if we move overnight to that that wouldn’t have an effect on the economy.”