‘Raise rates but be set to reverse the rise’ – Bank told
PRIME MINISTER Theresa May will hold key talks with French President Emmanuel Macron today amid attempts to stave off the threat of a no-deal Brexit as business leaders expressed deepening concerns over the handling of Britain’s departure from the European Union.
Mrs May is planning to cut short her holiday in the Italian lakes to hold a face-to-face meeting with Mr Macron, one of Europe’s key powerbrokers, as one of her own Ministers warned the UK and the EU face a “messy divorce” if Brexit talks break down.
Foreign Secretary Jeremy Hunt said yesterday that a failure to reach an agreement would be a “terrible mistake” and called for the EU to help find a “pragmatic solution” to the current impasse.
The Government is intensifying efforts to find a breakthrough in the Brexit process with a charm offensive of European leaders, and Mrs May will travel to the south of France to meet the French president at his Fort de Bregancon country retreat on the Mediterranean coast.
Mr Hunt visited Austria yesterday to coincide with the nation holding the rotating presidency of the Council of the European Union, giving Vienna a key role in deciding the agenda for the bloc’s leaders.
Speaking alongside his Austrian counterpart, Karin Kneissl, the Foreign Secretary said: “Austria has a special role because of its EU presidency and so all we say is, looking at your huge experience of foreign policy and historical knowledge, let’s not make this one of those moments where a terrible mistake is made which we are still talking about in 20 or 30 years.
“Let’s have a pragmatic solution that allows that deep and special partnership, friendship, between the UK and Europe to continue.”
Later, he added: “We want the EU to prosper but there is a real risk of a messy divorce which would be a geostrategic mistake.”
The Foreign Secretary has previously warned that the UK and EU could end up in a no-deal situation by accident even though neither side wants it.
But ahead of their talks Ms Kneissl poured cold water on that suggestion, and said: “From the (European) Commission’s side, there is a clear-cut schedule, so an accident is not really something people are working for.”
She later said that the talks with Mr Hunt had been “excellent and inspiring” and insisted that “we pursue a pragmatic approach and are prepared for the different possible scenarios of Brexit”.
Meanwhile, a senior figure in the food industry has called for a meeting with the Government as he warned Brexit is becoming “the stuff of nightmares”. The chief executive of the Food and Drink Federation (FDF), Ian Wright, urged Ministers to explain the implications of a nodeal Brexit to the industry.
He told The Yorkshire Post’s sister title, the i newspaper: “Brexit is shaping up to be the stuff of nightmares and it’s essential the Government begins to explain a) to businesses and b) the public exactly what the implications of a no-deal Brexit are.”
Mr Wright added that, despite the Government’s plans to issue notices to advise shoppers and businesses about the “arrangements and difficulties of Brexit”, Ministers would be “better informed” if they sought the expertise of industry workers.
Speculation around stockpiling has been mounting in recent days following suggestions from Ministers that it would be a “sensible” thing for the Government to do. The European Medicines Agency (EMA) is scaling back its operations as it expects significant staff losses as Brexit looms.
The EMA said it was braced for “significant staff loss” of up to 30 per cent as it prepares to move its headquarters from London to Amsterdam in March. The news comes as drug manufacturer Sanofi announced it was stockpiling in the event of a no-deal Brexit.
A Government spokeswoman denied stockpiling plans, and said: “The UK has an excellent level of food security, built on access to a range of sources including strong domestic production and imports from third countries.
“This will continue to be the case as we leave the EU.” THE BANK of England should raise interest rates today but “stand ready” to reverse the hike if Brexit talks do not go as planned, according to an influential think-tank.
The National Institute of Economic and Social Research (Niesr) said the Bank will likely “weigh the consequences of ‘getting it wrong’” ahead of the vote on whether to raise interest rates to the highest level for more than nine years.
Niesr said the Bank of England should only raise rates gradually and “stand ready to move in either direction should circumstances change”.
“The committee should emphasise the uncertainty (rather than the certainty) of its future policy stance in its communications and its willingness to reverse its decisions,” according to Niesr.
Policymakers on the Bank’s nine-member Monetary Policy Committee are expected to increase rates from 0.5 per cent to 0.75 per cent in today’s noon decision, but economists believe it will be a split vote.
Niesr’s warning came as its latest set of forecasts pencilled in UK growth of 1.4 per cent this year and 1.7 per cent next year broadly in line with its previous forecasts.
The predictions assume a “soft Brexit” scenario – where the UK achieves close to full access to the EU market for goods and services – and an increase in rates from 0.5 per cent to 0.75 per cent today, with rates hitting 1.25 per cent in 2019.
Niesr said the Government’s White Paper Brexit proposals are “more restrictive” than a soft Brexit.
It estimates that if Prime Minister Theresa May’s proposals are achieved, it will cost the economy the equivalent of £500 per person in lost output each year over time, compared with a soft Brexit scenario.
Niesr said this would rise to £800 per person in the event of a “no deal” Brexit.
“These estimates do not include the likely impact on productivity which could, on some estimates, double the size of the losses,” it said.
It said: “The UK economy is facing an unusual level of uncertainty because of Brexit.”