Now even Carney has joined Project Cheer

EU has most to lose from Brexit he admits in major U-turn

MARK Carney yesterday performed his biggest U-turn yet when he admitted that Brexit was not his top concern and that the EU has most to lose from it.

The Bank of England governor also hinted that his economic forecasts for the UK could be upgraded again after a run of strong figures.

It was a sharp contrast to his comments before the referendum, when he warned that a Leave victory could trigger a recession.

Yesterday Mr Carney told the Treasury select committee: ‘The financial stability issues are greater on the Continent than they are for the UK. There’s tremendous capacity, depth, breadth of financial services here in the UK.

‘At the point of leaving, there will be capacity taken out because certain institutions aren’t authorised. That is more likely to affect Europe than the UK.’

Before the June referendum, Mr Carney’s opponents accused him of meddling in politics and supporting the ‘ Project Fear’ campaign against Brexit.

Last May, Mr Carney said Brexit was the ‘most immediate and significant risk’ to the economy.

‘It would be likely to have a negative impact in the short term,’ he added. ‘I certainly think that would increase the risk of recession.’

And as markets panicked immediately after the unexpected result, he slashed interest rates to a new all-time low of 0.25 per cent.

But growth confounded the Bank’s expectations – and instead of collapsing, the economy expanded at exactly the same rate in the three months after the vote as it did beforehand.

Figures since then have suggested Britain remains strong and consumers are continuing to spend.

At yesterday’s committee hearing, Mr Carney said the EU was heavily dependent on London for finance and any attempt to cut the UK off would hurt it badly.

This was a point made by many Brexit backers during the referendum campaign. Britain exports £26billion of financial services each year to the rest of the EU and imports only £3billion, MPs heard.

Companies across the EU rely on the City for loans – and, even more importantly, for access to complex hedging and derivatives markets which allow them to control their risks. If the EU seeks to block this access, it could leave firms of all sizes unable to raise cash and exposed to huge losses with potentially devastating effects.

Mr Carney said: ‘It’s absolutely in the interests of all parties that some arrangement can be found to maintain market access.’

Treasury committee chairman Andrew Tyrie asked the governor if he still saw Brexit as the greatest threat to Britain’s financial stability. After repeated questioning, Mr Carney admitted he did not.

But he added that this was partly due to swift action by the Bank to prevent a market meltdown after votes were counted. ‘In the run-up to the referendum, we felt it was the largest risk because there were… things which could have happened which could have had financial stability consequences,’ he said.

‘Having got through the night and the day after, the scale of the immediate risks around Brexit have gone down for the UK.’

Soon after the vote, Bank officials slashed 2017 growth projections to 0.8 per cent. But the governor was then forced into a major U-turn in November when it became clear the country was performing well. As a result, growth forecasts were upgraded to 1.4 per cent.

And yesterday he suggested that at the Bank’s next meeting they could be revised up again. ‘Recent data would be consistent with some further upgrade,’ he said.

But Mr Carney dismissed the idea that the Bank had made an embarrassing error on Brexit. Missing the financial crisis in 2008 was ‘a big deal’, but the six months of strong performance since the Brexit vote was just ‘nice to have’.

Eurosceptic Tory MPs welcomed Mr Carney’s apparent change of heart. Bill Cash said: ‘It’s refreshing the Bank of England is now seeing the light. Everyone should take note, including the Remoaners.’ ÷Philip Hammond yesterday admitted that he has finally come to terms with the public’s decision to back Brexit and urged fellow Remain supporters to focus on achieving a strong divorce deal with Brussels.

The Chancellor said: The referendum decision is irreversible. People like me, who believed that it was better to remain inside the EU and to campaign for reform within, have moved on. The debate is now about what kind of Brexit.’