Brexit analysis not an 'exam crisis', Carney tells MPs

Marco Green
December 6, 2018

Carney also appeared to warn the committee against Theresa May's Brexit deal, in particular the backstop, which would see the whole of the United Kingdom remain in the EU customs union for a limited period in order to avoid a hard border between Ireland and Northern Ireland.

Mr Carney's comments follow the Bank's stark warning last week on the havoc a no-deal Brexit could wreak, with the worst-case scenario sending Britain into a recession worse than the financial crisis.

Bank of England governor Mark Carney rebuffed his critics in front of an audience of MPs this morning after insisting that his recent doomsday scenario was not an "exam crisis". The bank have been discussing the worst-case scenario in private for a couple of years.During the hearing Labour lawmaker John Mann thanked Carney for the analysis, which he said was "vital as part of this country's democracy". Its worst-case scenario for a chaotic exit sees the economy shrinking by 8 percent within a year, property prices plunging nearly a third and the pound losing a quarter of its value to below parity with the dollar. "You asked for something that we had, and we brought it and we gave it to you", he said.

Former BoE Governor Mervyn King on Tuesday lamented the central bank's involvement in what he said was an attempt to frighten the country about Brexit.

"It saddens me to see the Bank of England unnecessarily drawn into this project", King said in an article published on Bloomberg.

Mark Carney stressed the worst-case scenarios were "low-probability events in the context of Brexit" which the central bank needed to consider to make sure Britain's banking system could withstand any Brexit shocks.

"We're already sleeping soundly at night, because we have the financial sector, the core of the financial sector, in a position that it needs to be for a tough scenario".

Even if Britain left under Theresa May's proposed deal, the economy would be at least 1% smaller by 2024 than if voters had backed remain in the referendum, the report concluded.

The stability of the economy could be at risk because Britain would have to implement the EU's rules without a say on their design.

Carney reiterated his opposition to ceding decision-making over rules for the banking sector to the European Union after Brexit - a potential outcome of the "Norway-style" arrangement which some lawmakers would prefer to May's Brexit plans.

"The reason the financial sector is ready for Brexit is because we stress the financial sector to the kitchen sink, which is what you'd expect".

Other reports by Click Lancashire

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