Carney sees silver lining after Brexit hit to U.K. economy
LONDON For years, Bank of England boss Mark Carney warned of the economic risks of Britain leaving the European Union. Now that it has happened, he says there could be a silver lining in British Prime Minister Boris Johnson’s plans to boost growth.
Speaking to Reuters a month before he ends his nearly seven-year term as BoE governor, Carney said Britain was moving to address its main economic problem — weak productivity.
After a thumping election win in December that paved the way for Brexit on Jan. 31, Johnson gave the green light this week to a new high-speed railway line that, according to one estimate, is likely to cost more than 100 billion pounds (US$130 billion).
The prime minister has promised further help for regions where growth has fallen far behind London and other big cities.
“In an environment where everything is getting a fresh look, it’s fertile ground for taking a step back and making bigger changes than otherwise might have been made,” Carney said when asked about potential upsides for the economy from Brexit. “It’s early days but there are several initiatives — the budget will be telling — that suggest that some of these opportunities are being grasped.”
Carney burst onto Britain’s financial scene from his native Canada in 2013, taking over the reins of monetary policy when the country was still struggling to throw off the hangover of the global financial crisis.
Three years into his term, Britain voted in a referendum to leave the EU, despite warnings from Carney and most analysts that Britain’s economy was likely to suffer as a result.
Carney, who angered many supporters of Brexit with his comments, has not changed his mind about that, even if Johnson says leaving the EU will unleash Britain’s potential.
“It’s absolutely clear in the data, whether both the survey data and the hard data, that it’s had an impact, a notable impact on investment and of course that flows through to productivity,” he said.
The BoE has estimated that the Brexit process has reduced productivity — a key gauge of how much an economy can grow over the longer term — by two per cent.
Still, Brexit could prove to be “a conceptual positive” for Britain as it finds its feet outside the EU, Carney said. “It is a major reordering of our relationship not just with the European Union but our trading relationships with the rest of the world and it is prompting a reassessment of economic policy, structural economic policy in the country,” he said.
Carney said there were signs of a quick upturn in confidence in Britain after Johnson’s election win ended the uncertainty about whether Britain really would leave the EU on Jan. 31.
“We are already seeing a rebound in confidence, business confidence and to some extent a firming of consumer confidence,” he said. Reuters