CARNEY: ‘NO DEAL’ IS UNLIKELY ... BUT IT WOULD BE A DISASTER

A NO-DEAL Brexit could hammer UK businesses, the Governor of the Bank of England warned yesterday.

An ‘abrupt and disorderly’ departure from the EU risks economic chaos and higher interest rates, Mark Carney said.

He added that a disruptive withdrawal would probably cause a slump in the pound, delays at borders, higher production costs and tariffs, turmoil in supply chains and rising inflation.

There is little the Bank can do to shield the economy from a no-deal Brexit and it could be forced to raise interest rates to control prices, he warned.

Such a move would leave millions of borrowers facing higher costs for mortgages and other loans at a time when the economy may be slowing.

But Mr Carney said he and the Bank’s nine-member Monetary Policy Committee (MPC), which sets interest rates, does not believe such a scenario is the most likely outcome.

The Bank’s central forecast assumes there will be a smooth Brexit, with a transition period starting in March.

This still envisages interest rates of around 1.5 per cent by the end of 0 1 – double the current rate.

His comments came as the MPC held rates at 0.75 per cent. It said Brexit was the leading cause of uncertainty in its forecasts and was already hitting business investment, although it highlighted resilience from UK consumers.

Wages have been rising and the job market has also strengthened since the Bank’s last report in August.

The Bank expects UK GDP to grow by around 1.75 per cent a year on average in the coming years.