Mark Carney, the Bank of England governor, has spoken about the reality of a ‘no deal’ Brexit, and the precautions he has recommended to the financial sector.
Mr Carney said a failure to reach any agreement would spark a shock to the economy. He said the chances of ‘no deal’ were “uncomfortably high”. A ‘no deal’ Brexit would occur if the Government is unable to reach a final settlement on time, and in which the UK would revert to World Trade Organisation Most-Favoured-Nation trading rules. This is regarded by many as the worst-case scenario.
He revealed that he has ordered banks to stockpile money in the case of a need to urgently lend under this scenario. Mr Carney also suggested that he would immediately cut interest rates to the blow, having recently raised the base rate to 0.75%.
Mr Carney continued and implicated that the economy would enter a period of recession were this to the be outcome of negotiations. Property prices could plummet by a third, interest rates could increase 4%, and unemployment would double to 9%. In all, the economy would shrink by up to 4% in line with many academic predictions including from the London School of Economics.
Response to this has been mixed. For businesses, this will be regarded as a welcomed sign of reality. Whilst the details may seem grim and would arguably keep business owners awake at night, they have been calling for precautionary steps to be taken. This intervention could be seen as the first proper measure to manage damage from a ‘no deal’.
However, Brexit supporting media, including The Sun, ignored both the severity of this warning and the expertise of Mr Carney. Their editorial in response to his comments called for the nation to be ready for a ‘no deal’, therefore preventing ‘remoaners’ fear spreading’.
In deed, Brexit supporting Conservative Jacob Rees-Mogg. He accused Mr Carney of being a ‘high priest of project fear’, similarly repeating the lack of consideration for expert opinion.
However, it would appear that these warnings are starting to resonate with members of the public. Recent Sky Data would suggest that half of Brits now support a new referendum on the Britain’s final Brexit settlement. This referendum would be three-way, asking between a ‘no deal’, a government deal (if there is one), and remaining.
Former Labour Cabinet minister Lord Mandelson called on the PM to hold a second referendum as the only way to face down hardline Tory Brexiteers. Though how key figures like Micheal Gove and Boris Johnson would take this is hard to judge, and given the rumours that dissatisfied Conservative MPs are ready and waiting to mount a leadership bid against Theresa May, the likelihood of a willing second vote is unlikely.
Regardless, what is clear is that the warnings from key experts in industry and finance are beginning to take hold with the public.
Whether this is because of the way their warnings are now resonating with households, like food and medical shortages, or whether people are simple tired of the instability it is hard to know.
However, it is clear that public opinion is starting to shift.