Risk of Brexit re­ces­sion now ‘one in three’

● Car­ney says ‘pro­found un­cer­tain­ties’ weigh­ing on econ­omy as Bank keeps in­ter­est rates steady and slashes growth fore­cast

The Scotsman - - FRONT PAGE - By PARIS GOURTSOYAN­NIS

The Bank of Eng­land has warned there is a one-inthree chance of the econ­omy go­ing into re­ces­sion as it held in­ter­est rates at 0.75 per cent over fears of the im­pact from Brexit.

Bank gov­er­nor Mark Car­ney said “pro­found un­cer­tain­ties over the fu­ture of the global trad­ing sys­tem and the form Brexit will take are weigh­ing on UK eco­nomic per­for­mance”.

The Mon­e­tary Pol­icy Com­mit­tee voted to keep rates un­changed.

The Bank of Eng­land has warned there is now a one-inthree chance of the UK econ­omy go­ing into re­ces­sion as it held in­ter­est rates at 0.75 per cent over fears of the im­pact from Brexit un­cer­tainty.

Bank gov­er­nor Mark Car­ney said that “pro­found un­cer­tain­ties over the fu­ture of the global trad­ing sys­tem and the form that Brexit will take are weigh­ing on UK eco­nomic per­for­mance”.

Mem­bers of the nine-strong Mon­e­tary Pol­icy Com­mit­tee (MPC) voted unan­i­mously to keep rates un­changed as it said that height­ened no-deal Brexit fears had seen un­cer­tainty be­come “more en­trenched”

The Bank of Eng­land slashed its growth fore­cast to 1.3 per cent for both this year and next, down from the 1.5 per cent and 1.6 per cent re­spec­tively.

Yes­ter­day Prime Min­is­ter Boris John­son chaired his first meet­ing of the Cab­i­net no-deal exit strat­egy com­mit­tee, and Chan­cel­lor Javid or­dered HM Rev­enue and cus­toms to make no-deal plan­ning its “ab­so­lute top pri­or­ity” in the lat­est sign of the gov­ern­ment’s ef­forts to pre­pare for po­ten­tially crash­ing out of the EU on 31 Oc­to­ber.

The Chan­cel­lor has writ­ten to HMRC chief ex­ec­u­tive Sir Jon Thomp­son de­mand­ing ac­tion to sup­port busi­nesses and tax­pay­ers and en­sure staff and sys­tems are in place to “de­liver a func­tion­ing regime” on Brexit day.

It fol­lows the an­nounce­ment of more than £2 bil­lion of ad­di­tional fund­ing to pre­pare for a no-deal Brexit.

Mr Javid con­firmed on Wed­nes­daythatad­di­tion­aln­odeal fund­ing would in­clude £1.1bn for de­part­ments and the de­volved ad­min­is­tra­tions to spend im­me­di­ately, with a fur­ther £1bn in re­serve.

Even with a Brexit deal in 90 days, the Bank of Eng­land said there was a 33 per cent chance that an­nual growth will be be­low zero in the first quar­ter of 2020.

It now ex­pects UK gross domestic prod­uct to flat­line in the sec­ond quar­ter, down from 0.5 per cent growth be­tween Jan­uary and March.

The Bank’s fore­casts are based on a smooth Brexit deal, which is in­creas­ingly look­ing un­likely as new Prime Min­is­ter Boris John­son takes a hard­line stance in ne­go­ti­a­tions with the EU ahead of the Oc­to­ber 31 dead­line.

Mr Car­ney said the Bank will “take all ap­pro­pri­ate mea­sures” to sup­port jobs and growth in the event of an even more dam­ag­ing no-deal Brexit, but stressed there were “lim­its” to what it could do.

Mr Car­ney said there would be an “in­stan­ta­neous shock” on the econ­omy of a no deal and cau­tioned the pound would fall, inflation would rise and GDP would slow.

The pound has al­ready tum­bled by 6 per cent since May as no-deal fears mount and dipped be­low $1.21 against the US dol­lar yes­ter­day, its low­est level since Jan­uary 2017.

Lib­eral Demo­crat Trea­sury spokesman Chuka Umunna said the warn­ing from the Bank of Eng­land con­firmed that “any form of Brexit will weaken our econ­omy”.

“It is per­fectly clear that Brexit is al­ready harm­ing our econ­omy: the man­u­fac­tur­ing sec­tor is near­ing record lows and the pound is trapped in sharp de­cline,” Mr Umunna said.

“How can the Tory gov­ern­ment claim they can end aus­ter­ity and grow the econ­omy when their pol­icy of Brexit is push­ing it to the brink?”

Mean­while, a new poll sug­gests that al­most three­quar­ters of Bri­tons do not ex­pect Boris John­son to be able to agree a deal with the EU be­fore Oc­to­ber 31.

Ac­cord­ing to polling com­pany Ip­sos Mori, 74 per cent of Bri­tons do not think the UK and the EU will be able to agree the terms of Bri­tain’s exit by the dead­line. Just a third of vot­ers are con­fi­dent that Mr John­son will be able to “get a good deal” for Bri­tain, with 64 per cent say­ing they are not con­fi­dent.

Mr John­son has en­joyed a poll bounce since en­ter­ing Num­ber 10, with a 25-point lead over Jeremy Corbyn when peo­ple were asked who would make the most ca­pable Prime Min­is­ter.

The poll also gives the Tories a 10-point lead if a gen­eral elec­tion was held to­mor­row, with the Con­ser­va­tives up nine points on 34 per cent, Labour down three on 24 per cent, the Lib­eral Democrats up three on 20 per cent, and the Brexit Party down seven points, on 9 per cent .

“How can the Tory gov­ern­ment claim they can end aus­ter­ity and grow the econ­omy when their pol­icy of Brexit is push­ing it to the brink?”

CHUKA UMUNNA

Mark Car­ney says ‘pro­found un­cer­tain­ties over the fu­ture of the

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