The governor of the Bank of England today said Brexit will make the UK poorer – as he took a swipe at Boris Johnson’s claim the UK can “have our cake and eat it” after leaving the EU.
Mark Carney warned of job cuts, low wages and increasing prices as a result of Britain exiting the EU.
Speaking at the City of London’s Mansion House, Carney said Brexit is unlikely to be a “gentle stroll along a smooth path to a land of cake and consumption.”
Carney’s comments come nine months after foreign secretary and leave campaigner Johnson boasted that the government’s Brexit “policy is having our cake and eating it”.
During his Mansion House speech, Carney also ruled out raising interest rates because wage growth is “anaemic” and likely to remain so.
He said: “Raising barriers to trade disproportionately hurts the least well off through higher prices and fewer opportunities.”
Carney said the UK economic performance will not just be subject to any Brexit deals but also the “expectations” of how those deals will work.
In a pessimistic Brexit verdict, Carney said: “Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU.
“But it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change.”
He suggested that if Britain fails to secure a transitional arrangement that retain single market and customs union access with the EU after March 2019, the slump in Sterling seen since the referendum vote next year could worsen and force companies to move operations out of the UK.
He said: “Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans. Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.”
Carney spoke directly after Chancellor Philip Hammond gave a speech detailing a vision for a softer Brexit.
Hammond, who supported remain and had been sidelined by Theresa May prior to the general election, aped Labour’s call for “jobs first” Brexit.
He also warned that failing to agree a transitional deal after the end of the two year negotiations will cause “dangerous cliff edges”.
Hammond’s comments echoed those made by the Society of Motor Manufacturers and Traders (SMMT) earlier today, who said that without a transitional agreement the automotive sector would “fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior WTO terms”.
The Chemical Industries Association (CIA) also called for a transitional arrangement saying “staying in the single market for that appropriate transition period would help support trade, investment, jobs and overall economic growth in the critical time taking us to exit from the EU”.