A lack of secure future trading deal between the European Union and Britain after Brexit will trigger slower growth with Britain’s economy, according to Bank of England Governor Mark Carney on Sunday.
For the first time since 2007, before the beginning of the global financial crisis, the BoE raised interest on Thursday. However, the sterling fell sharply as the central bank also explained its expectations for its rate rises are only “very gradual”.
The 2016 Brexit vote was followed by Britain economy’s sharp slowing this year, although the BoE decided to raise rates due to their belief that Brexit will build more inflation pressure, in relation with lower migration and weaker investments.
“In the short term, without question, if we have materially less access (to the EU’s single market) than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth,” stated Carney as he was asked in an interview on whether Britain’s economy will be affected by the lack of Brexit deal.
Carney also explained that in terms of the current strength of the world economy and other factors, British business investment should be booming now, instead the rate is just growing due to the uncertainty of the Brexit negotiations’ outcome.
He also disclosed on Sunday that it was possible that a bad Brexit deal result may strain the BoE and prevent it from cutting interest rates in the future due to that inflationary pressure.
“The scenario you paint is not the most likely, by any stretch of the imagination, but it is a possibility,” he said.
The BoE governor has been rained political pressure from some supporters of the vote to leave the EU, who was distraught by his comments that Brexit is having a dragging impact on the economy.
Small British Business
The British economy is struggling but not stalling which still entails far reaching political consequences.
The false news of a possible economic collapse was released before and during the days after last year’s referendum on EU membership, boosting the hard Brexit supporters’ confidence. A group of them agreed that a “no deal” with the EU on future relations after the 2019 exit date isn’t a negative thing.
Many British business and others are quietly sorry the economy hasn’t taken an impact. In their belief, a hard shock seems the one thing that can change the politics around Brexit and drive the government to strike a favorable trade deal with Europe. If the hit comes, it’ll probably come “too late”, according to a former government source. The likely alternative course, economists believe, is a long-term economic slowdown.
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