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The bank warns that no deal would see Britain recession



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Title of the mediumCarney warns against a lower pound and higher inflation if no agreement is reached

Brexit without agreement could send a declining pound and trigger a worse recession than the financial crisis, Bank of England said.

It is said that the UK economy could drop by 8% at a time when no transition period was reached, while house prices could drop by almost a third.

Bank of England also warned that the pound could drop by a quarter.

The Bank's analysis comes after the Finance Ministry said the UK would be worse than any form of Brexit.

The scenario of this bank is not what is expected, but it is the worst case scenario based on so-called "Intact Brexit".

The scenario deals with five years after the UK left the EU.

But by the end of 2023 the economy is expected to continue to grow.

  • What did we learn from the Bank of England?
  • Brexit will make the UK worse, warns the government

"These are scenarios that are not predictions, and they illustrate what can happen, not necessarily, what is likely to happen.

"Together, the scenarios emphasize that Brexit's impact will depend on the direction, size and speed of the effects of the reduced openness of the UK economy," said Bank of England Governor Mark Carney.

What is the "Bad Brexit"?

The Bank of England has made a number of assumptions – not prognoses – about what would cause an inappropriate Brexit.

  • The United Kingdom will return to the rules of the World Trade Organization
  • By 2022, there were no new trade agreements
  • The UK will lose all access to existing trade agreements between the EU and third countries
  • Severe border disruption due to customs controls
  • Migration grows from 150,000 per year to 100,000 a year

Bank of England is not likely to do so.

What is happening during this inappropriate scenario?

The scenarios drawn up by the Bank of England show that GDP will fall by 8% over the current forecast in 2019.

Growth would recover rapidly and the economy would re-expand until the end of 2023, but it should be smaller than where it was earlier.

Unemployment would rise to 7.5%, house prices drop by 30%, and commercial property prices dropped by 48%.

Interest rates would be 4%.

What other scenarios did the Bank of England consider?

The bank looked at the other three scenarios.

  • "disturbing" Brexit, where the UK retained access to certain trade agreements.
  • what could happen if it were agreed that trade agreements would provide the United Kingdom with a "close" relationship
  • what could happen if it were agreed that trade agreements would give the United Kingdom a "less tight" relationship

Close links are those where there are no customs controls, no regulatory barriers and a partial agreement on financial services.

A less close relationship is that customs controls begin after 2021 and that additional regulatory controls are in place.

What is happening in these scenarios?

If Brexit is more disturbing than disorderly, GDP will fall by 3% over the next five years by 2022, house prices will fall by 14% and unemployment will reach 5.75%

If a close trade relationship is to be concluded, the economy could still be 1% smaller than if the UK remained in the EU but 1.5% higher than the bank's last estimate.

If it is less close, economic growth could be 3.75% lower than if the United Kingdom remained in the EU and 0.75% less than predicted in the latest inflation report.

These data cover the period up to 2023.

What does that mean for Theresa May?

Political reporter Brian Wheeler

Theresa May did not tell bank economists what she should say in her report, but it is definitely useful to her. Timing is also significant.

The upgraded copy of the Downing Street media distribution network today was an "economy". Tomorrow is "safety".

Therefore, expect that during the elections until December 11, you will have a permanent minor official warning about the dangers of Brexita.

Downing Street hopes that so many who hate her contract (and they do) MPs come to consider it the only safe choice.

The problem is that these warnings, whether well-grounded in facts and figures, are too easily deprecated as "project fear". The more frightening, the easier they are to be released.

What has the bank said yet?

Mr. Carney said the bank was monitoring the markets and said he was ready to lend to banks in the financial markets.

He also said banks could have less capital if the risks were too high.

But he warned the bank could do little.

"There is only a small monetary policy that could offset the potentially significant fluctuations in productivity and supply that Brexit might mean, but the firm commitment of the bank to price and financial stability will support the necessary adjustment of the real economy.

"The future potential of this economy and its implications for jobs, real wages and wealth are not in the gift of central bankers," he said.

What does it mean for the banking sector?

The Bank of England exposed seven major creditors to a stress test that was two and a half times worse than the Brexit scenarios.

All seven creditors – Royal Bank of Scotland, HSBC, Barclays, Lloyds, Standard Chartered, Santander and Nationwide Building Society – passed the test.


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