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| Mark Carney: European economies face hit if cut off from City of London Mark Carney: European economies face hit if cut off from City of London | |
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| Mark Carney, the governor of the Bank of England, has warned that European economies could be hit if their access to the City of London is impeded after Britain leaves the EU. | Mark Carney, the governor of the Bank of England, has warned that European economies could be hit if their access to the City of London is impeded after Britain leaves the EU. |
| Speaking as the Bank issued its half-yearly assessment of risks to the financial markets, Carney said: “The UK is effectively the investment banker for Europe. More than half the equity and debt raised is raised in the UK by firms based in the United Kingdom, quite often from investors based in the United Kingdom.” | Speaking as the Bank issued its half-yearly assessment of risks to the financial markets, Carney said: “The UK is effectively the investment banker for Europe. More than half the equity and debt raised is raised in the UK by firms based in the United Kingdom, quite often from investors based in the United Kingdom.” |
| Among the risks listed in the Bank’s financial stability report were those posed by the uncertainties created by Brexit, which Carney said needed to be as “smooth and orderly as possible”. | Among the risks listed in the Bank’s financial stability report were those posed by the uncertainties created by Brexit, which Carney said needed to be as “smooth and orderly as possible”. |
| “Additional risks to the euro area could emerge as a consequence of the UK’s withdrawal from the European Union. Banks located in the UK supply over half of debt and equity issuance by continental firms, and account for over three-quarters of foreign exchange and derivatives activity in the EU,” said Carney. | “Additional risks to the euro area could emerge as a consequence of the UK’s withdrawal from the European Union. Banks located in the UK supply over half of debt and equity issuance by continental firms, and account for over three-quarters of foreign exchange and derivatives activity in the EU,” said Carney. |
| “If these UK-based firms have to adjust their activities in a short time frame, there could be a greater risk of disruption to services provided to the European real economy, some of which could spill back to the UK economy through trade and financial linkages.” | “If these UK-based firms have to adjust their activities in a short time frame, there could be a greater risk of disruption to services provided to the European real economy, some of which could spill back to the UK economy through trade and financial linkages.” |
| This week Mario Draghi, the president of the European Central Bank, said Britain would bear the brunt of the economic damage if Brexit created a UK economy with lower migration and weaker growth in trade and investment. | This week Mario Draghi, the president of the European Central Bank, said Britain would bear the brunt of the economic damage if Brexit created a UK economy with lower migration and weaker growth in trade and investment. |
| Carney said there would be transitional arrangements and that it was preferable that firms in the City knew as “much as possible about the desired end point and as much as possible as early as possible about the potential path to that end point”. | Carney said there would be transitional arrangements and that it was preferable that firms in the City knew as “much as possible about the desired end point and as much as possible as early as possible about the potential path to that end point”. |
| Article 50, the formal process of leaving the EU, has not yet been triggered and Carney said the timing for firms to implement contingency plans for Brexit “is still some way off”. | Article 50, the formal process of leaving the EU, has not yet been triggered and Carney said the timing for firms to implement contingency plans for Brexit “is still some way off”. |
| He said the biggest risks to financial stability in the UK were from global sources, warning that there could be an impact on global trade from Donald Trump’s election as US president. Chinese debt is high and there are also risks in the eurozone, including the Italian referendum on Sunday. | He said the biggest risks to financial stability in the UK were from global sources, warning that there could be an impact on global trade from Donald Trump’s election as US president. Chinese debt is high and there are also risks in the eurozone, including the Italian referendum on Sunday. |
| Carney said he did not expect the slowdown in global growth to be as severe as the near-2% contraction in global growth which was included in this year’s health check on the UK’s banks. | Carney said he did not expect the slowdown in global growth to be as severe as the near-2% contraction in global growth which was included in this year’s health check on the UK’s banks. |
| He added: “There is this possibility that the slowdown in the growth in world trade, which we have seen over the past few years, accelerates because of discrete policy initiatives potentially from the world’s largest economy. | He added: “There is this possibility that the slowdown in the growth in world trade, which we have seen over the past few years, accelerates because of discrete policy initiatives potentially from the world’s largest economy. |
| “While that might not directly affect the United Kingdom, if it slows the pace of global growth – and we’re an open trading nation, one of the most open nations in the world – it’s going to have a knock-on effect through this economy.” | “While that might not directly affect the United Kingdom, if it slows the pace of global growth – and we’re an open trading nation, one of the most open nations in the world – it’s going to have a knock-on effect through this economy.” |