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Bank of England governor warns no-deal Brexit could cause recession - business live Bank of England governor warns no-deal Brexit could cause recession - as it happened
(about 4 hours later)
And finally, here’s our Larry Elliott on the Bank’s forecasts:
The Bank of England has warned the economy is on course for its weakest year since the global financial crisis, as evidence suggests Brexit jitters are spreading from companies to consumers.
In its latest quarterly health check, the Bank cut its growth forecast for 2019 from 1.7% to 1.2%, blaming a slowing global economy as well as Brexit uncertainty for the sharp downward revision, and said there was a 25% chance of a recession this year.
Threadneedle Street said its gloomier forecast assumed the UK’s departure from the EU in seven weeks goes smoothly. If the prediction comes true, it would be the slowest growth since the economy contracted by 4.2% in 2009, during the financial crisis.
Mark Carney, the Bank’s governor, said: “The fog of Brexit is causing short-term volatility in the economic data and, more fundamentally, it’s creating a series of tensions.”
More here:
UK economy set for worst year since financial crisis, says Bank of England
Goodnight! GW
In a stark example of what Brexit fog looks like, UK exporters preparing to send goods to the other side of the world RIGHT NOW run the risk of bring locked out.In a stark example of what Brexit fog looks like, UK exporters preparing to send goods to the other side of the world RIGHT NOW run the risk of bring locked out.
Business leaders have told us that a ship departing a British port for, say, the Antipodies could arrive to find Britain has crashed out of the EU without a deal - leaving them unable to unload their cargo due to tariff confusion.Business leaders have told us that a ship departing a British port for, say, the Antipodies could arrive to find Britain has crashed out of the EU without a deal - leaving them unable to unload their cargo due to tariff confusion.
My colleague Richard Partington explains:My colleague Richard Partington explains:
The Confederation of British Industry, the EEF manufacturers’ lobby group and trade experts said exporters could be dispatching goods from UK ports imminently which would not arrive until after the 29 March deadline – raising the prospect of goods being stuck in ports or facing hefty additional costs in the event of a disorderly Brexit.The Confederation of British Industry, the EEF manufacturers’ lobby group and trade experts said exporters could be dispatching goods from UK ports imminently which would not arrive until after the 29 March deadline – raising the prospect of goods being stuck in ports or facing hefty additional costs in the event of a disorderly Brexit.
The maximum shipping time to anywhere in the world is about 50 days – with the furthest being Australia and New Zealand – meaning cargoes sent from this weekend could face disruption when they arrive around the 29 March deadline.The maximum shipping time to anywhere in the world is about 50 days – with the furthest being Australia and New Zealand – meaning cargoes sent from this weekend could face disruption when they arrive around the 29 March deadline.
More here:More here:
No-deal Brexit: UK exporters risk being locked out of world's harboursNo-deal Brexit: UK exporters risk being locked out of world's harbours
The Bank of England’s gloomy outlook has added to market anxiety over the health of the global economy.The Bank of England’s gloomy outlook has added to market anxiety over the health of the global economy.
Most European stock markets are deep in the red this afternoon, as fear shoves greed out of the way.Most European stock markets are deep in the red this afternoon, as fear shoves greed out of the way.
Weak factory data from Germany and Spain this morning, and growth downgrades from the EC, have raised fears that growth is faltering...and central banks may not be able to stop it.Weak factory data from Germany and Spain this morning, and growth downgrades from the EC, have raised fears that growth is faltering...and central banks may not be able to stop it.
Connor Campbell of SpreadEx explains:Connor Campbell of SpreadEx explains:
The Bank of England – keen to hammer home the cost of the UK’s Brexit uncertainty – added to the dour tone set off by the European Commission earlier in the session.The Bank of England – keen to hammer home the cost of the UK’s Brexit uncertainty – added to the dour tone set off by the European Commission earlier in the session.
Hours after the EC put the UK’s 2019 growth at 1.3%, the Bank of England painted an even more depressing picture, cutting its own forecasts to just 1.2%. Mark Carney made clear, however, that the ‘fog’ of uncertainty currently cloaking the country’s economy means growth, and inflation, could easily be much higher or lower than that estimate dependant on what happens after March 29th. There was also the warning that a no-deal Brexit would greatly increase the chance of a recession; nothing particularly new, then, but nevertheless a sharp reminder of what is at stake.Hours after the EC put the UK’s 2019 growth at 1.3%, the Bank of England painted an even more depressing picture, cutting its own forecasts to just 1.2%. Mark Carney made clear, however, that the ‘fog’ of uncertainty currently cloaking the country’s economy means growth, and inflation, could easily be much higher or lower than that estimate dependant on what happens after March 29th. There was also the warning that a no-deal Brexit would greatly increase the chance of a recession; nothing particularly new, then, but nevertheless a sharp reminder of what is at stake.
Guy Foster, head of research at Brewin Dolphin, suspects the Bank of England could raise interest rates twice this year -- IF Britain secures a soft Brexit.Guy Foster, head of research at Brewin Dolphin, suspects the Bank of England could raise interest rates twice this year -- IF Britain secures a soft Brexit.
“With inflationary challenges still present, the Bank of England has reoriented its focus toward growth challenges as concerns build over the threat of a global economic slowdown. In a similar fashion to China and the US, UK policymakers are tacking to a more accommodating stance, communicating additional patience on the delivery of future interest rate hikes.“With inflationary challenges still present, the Bank of England has reoriented its focus toward growth challenges as concerns build over the threat of a global economic slowdown. In a similar fashion to China and the US, UK policymakers are tacking to a more accommodating stance, communicating additional patience on the delivery of future interest rate hikes.
Of course, Brexit remains the elephant in the room and, should an orderly outcome transpire, we would expect the Bank to flip back to a marginally more hawkish bias – perhaps delivering as many as two interest rate hikes before year end.”Of course, Brexit remains the elephant in the room and, should an orderly outcome transpire, we would expect the Bank to flip back to a marginally more hawkish bias – perhaps delivering as many as two interest rate hikes before year end.”
Not for the faint-hearted....Not for the faint-hearted....
This was the stand out (grim) chart from the @bankofengland Inflation Report for me. What the Bank thinks the Brexit referendum has done to UK business investment...: pic.twitter.com/zjfAon9P6OThis was the stand out (grim) chart from the @bankofengland Inflation Report for me. What the Bank thinks the Brexit referendum has done to UK business investment...: pic.twitter.com/zjfAon9P6O
Several experts are concerned that the BoE has slashed its 2019 growth forecast to a measly 1.2%.Several experts are concerned that the BoE has slashed its 2019 growth forecast to a measly 1.2%.
John McDonnell MP, Labour’s Shadow Chancellor, says it shows the risk of leaving the EU without a deal:John McDonnell MP, Labour’s Shadow Chancellor, says it shows the risk of leaving the EU without a deal:
“The Bank of England downgrading it’s 2019 growth forecast shows that people are increasingly worried about this Government’s stewardship of the economy.“The Bank of England downgrading it’s 2019 growth forecast shows that people are increasingly worried about this Government’s stewardship of the economy.
“The Government must be stronger in averting a no-deal Brexit, and act now to protect the economy.”“The Government must be stronger in averting a no-deal Brexit, and act now to protect the economy.”
Rain Newton-Smith, CBI chief economist, fears the economy is already “seizing up” from uncertainty:Rain Newton-Smith, CBI chief economist, fears the economy is already “seizing up” from uncertainty:
The Bank’s forecasts, when put together with recent business surveys, illustrate the harmful impact on the economy the longer that this goes on.The Bank’s forecasts, when put together with recent business surveys, illustrate the harmful impact on the economy the longer that this goes on.
Brexit uncertainty has kept interest rates on hold this month, and the near-term outlook for the UK economy is also weaker. However, in the event of a smooth Brexit, the Bank expect a lift to economic growth and business investment further ahead, as greater clarity unlocks pent-up demand.”Brexit uncertainty has kept interest rates on hold this month, and the near-term outlook for the UK economy is also weaker. However, in the event of a smooth Brexit, the Bank expect a lift to economic growth and business investment further ahead, as greater clarity unlocks pent-up demand.”
James Smith, research director at the Resolution Foundation, has warned that such weak growth would hurt living standards across the UK.James Smith, research director at the Resolution Foundation, has warned that such weak growth would hurt living standards across the UK.
“The Bank has today put a major health warning on the UK economy as ongoing Brexit uncertainty and weaker global growth combine. Such a slowdown, should it materialise, is not just about abstract GDP figures but slower earnings and income growth for households all over the country.“The Bank has today put a major health warning on the UK economy as ongoing Brexit uncertainty and weaker global growth combine. Such a slowdown, should it materialise, is not just about abstract GDP figures but slower earnings and income growth for households all over the country.
“Today’s report should remind politicians across parliament that the stalemated Brexit process comes with a very real price tag. Everyone should be focused on the action that sits within the hands of UK policy makers to deliver stronger growth than the frankly awful forecasts published today by the Bank.“Today’s report should remind politicians across parliament that the stalemated Brexit process comes with a very real price tag. Everyone should be focused on the action that sits within the hands of UK policy makers to deliver stronger growth than the frankly awful forecasts published today by the Bank.
The broad message from Mark Carney today is that growth has weakened since the last Inflation Report three months ago, Brexit fog is clouding the economy, and the risk of a no-deal Brexit has intensified.The broad message from Mark Carney today is that growth has weakened since the last Inflation Report three months ago, Brexit fog is clouding the economy, and the risk of a no-deal Brexit has intensified.
On growth, the BoE now expects UK GDP to only rise by 1.2% this year, down from 1.7%. That would be the weakest growth since 2009, when Britain was reeling from the financial crisis.On growth, the BoE now expects UK GDP to only rise by 1.2% this year, down from 1.7%. That would be the weakest growth since 2009, when Britain was reeling from the financial crisis.
Most of the damage will be done in the first half of 2019. If Britain secures a soft Brexit, growth could then pick up - perhaps faster than the Bank expects.Most of the damage will be done in the first half of 2019. If Britain secures a soft Brexit, growth could then pick up - perhaps faster than the Bank expects.
Governor Carney warned:Governor Carney warned:
The fog of Brexit is causing short term volatility in the economic data, and more fundamentally, it is creating a series of tensions in the economy, tensions for business.”The fog of Brexit is causing short term volatility in the economic data, and more fundamentally, it is creating a series of tensions in the economy, tensions for business.”
On the upside, the economy still looks to be in OK shape:On the upside, the economy still looks to be in OK shape:
The fundamentals of the UK economy are sound. The financial sector is resilient. Corporate balance sheets are strong, and the labour market is tight.”The fundamentals of the UK economy are sound. The financial sector is resilient. Corporate balance sheets are strong, and the labour market is tight.”
But the downside is that leaving the EU without a deal would hurt the economy - and Mark Carney believes it’s more likely than before. He warned that a No-Deal would raise the chances of “negative quarters” of growth. Two or more negative quarters would be a recession.But the downside is that leaving the EU without a deal would hurt the economy - and Mark Carney believes it’s more likely than before. He warned that a No-Deal would raise the chances of “negative quarters” of growth. Two or more negative quarters would be a recession.
He also warned that half of UK firms simply aren’t ready for a no-deal Brexit, saying:He also warned that half of UK firms simply aren’t ready for a no-deal Brexit, saying:
“Although many companies are stepping up their contingency planning, the economy as a whole is still not yet prepared for a no-deal, no transition exit.“Although many companies are stepping up their contingency planning, the economy as a whole is still not yet prepared for a no-deal, no transition exit.
In terms of our agent surveys, most recent surveys, of businesses and their preparedness, half of them say they are not ready. And the half that say they are ready... ready means ‘we’ve done all we can’.In terms of our agent surveys, most recent surveys, of businesses and their preparedness, half of them say they are not ready. And the half that say they are ready... ready means ‘we’ve done all we can’.
Economy as a whole is "not yet prepared" for a no-deal #Brexit - Mark Carney gives details of current UK economic uncertainty https://t.co/SgOUA5Sloi pic.twitter.com/PI5hR8wCZwEconomy as a whole is "not yet prepared" for a no-deal #Brexit - Mark Carney gives details of current UK economic uncertainty https://t.co/SgOUA5Sloi pic.twitter.com/PI5hR8wCZw
Carney also criticised European Council chief Donald Tusk, over his claim that a “special place in hell” awaits the leaders of the Brexit campaign. Carney said he was “surprised” by the comments (which have created quite a biblical storm in the UK), and quoted from the Gospel of Matthew:Carney also criticised European Council chief Donald Tusk, over his claim that a “special place in hell” awaits the leaders of the Brexit campaign. Carney said he was “surprised” by the comments (which have created quite a biblical storm in the UK), and quoted from the Gospel of Matthew:
If one wants to be theological, “Do not judge because you too will be judged.”If one wants to be theological, “Do not judge because you too will be judged.”
And asked whether he woke up every morning, regretting extending his tenure as BoE governor to help with Brexit, Carney ruefully revealed that the crisis has been interfering with his beauty sleep:And asked whether he woke up every morning, regretting extending his tenure as BoE governor to help with Brexit, Carney ruefully revealed that the crisis has been interfering with his beauty sleep:
“I don’t wake up in the morning any more....I wake up in the middle of the night.“I don’t wake up in the morning any more....I wake up in the middle of the night.
“No, the reason I extended was to remain here during a period that could be slightly more volatile or could involve a slightly more difficult transition ..., so obviously I don’t regret it all.”“No, the reason I extended was to remain here during a period that could be slightly more volatile or could involve a slightly more difficult transition ..., so obviously I don’t regret it all.”
[Thanks to Thomson Reuters for the quotes][Thanks to Thomson Reuters for the quotes]
I think we can all sympathise with Mark Carney’s disrupted sleep....I think we can all sympathise with Mark Carney’s disrupted sleep....
Asked at a presser if he wakes up each morning regretting that he's the @bankofengland governor in the age of Brexit, @markcarney1 replies: "I don't wake up in the morning any more ... I wake up in the middle of the night." @BrexitAsked at a presser if he wakes up each morning regretting that he's the @bankofengland governor in the age of Brexit, @markcarney1 replies: "I don't wake up in the morning any more ... I wake up in the middle of the night." @Brexit
Q: Isn’t there a danger that Brexit uncertainty will persist for longer than you expect, hurting the economy, especially as you think it will take four years to agree a UK-EU trade deal?Q: Isn’t there a danger that Brexit uncertainty will persist for longer than you expect, hurting the economy, especially as you think it will take four years to agree a UK-EU trade deal?
Some uncertainty will linger around, yes, Mark Carney replies. But it would be “substantially less” if the UK leaves with a withdrawal agreement.Some uncertainty will linger around, yes, Mark Carney replies. But it would be “substantially less” if the UK leaves with a withdrawal agreement.
That’s the end of the press conference. Reaction to follow.....That’s the end of the press conference. Reaction to follow.....
Q: Have you considered copying the Federal Reserve, and holding press conference more frequently?Q: Have you considered copying the Federal Reserve, and holding press conference more frequently?
Carney says the Bank has already been making changes to communicate better with households. And as Brexit is such a big issue, the people responsible with handling Brexit should be the ones front and centre right now.Carney says the Bank has already been making changes to communicate better with households. And as Brexit is such a big issue, the people responsible with handling Brexit should be the ones front and centre right now.
Carney asked if he ever wakes up in the morning and wishes he’d left the BoE in 2018 as originally planned. Jokes: “I don’t wake up in the morning any more - I wake up in the middle of the night!”Carney asked if he ever wakes up in the morning and wishes he’d left the BoE in 2018 as originally planned. Jokes: “I don’t wake up in the morning any more - I wake up in the middle of the night!”
Q: Are you worried about disruption at Barclays, where activity investor Ed Bramson is trying to shake up the bank and get a seat on the board.Q: Are you worried about disruption at Barclays, where activity investor Ed Bramson is trying to shake up the bank and get a seat on the board.
Carney says its important to maintain responsible banking and safe lending standards, and they won’t be compromised for anyone.Carney says its important to maintain responsible banking and safe lending standards, and they won’t be compromised for anyone.
Q: When you arrived as governor, you intended to leave by last summer. We’re all absolutely delighted that you stayed on longer, but do you ever wake up in the morning and wish you’d stuck to plan A, asks my colleague Larry Elliott mischievously.Q: When you arrived as governor, you intended to leave by last summer. We’re all absolutely delighted that you stayed on longer, but do you ever wake up in the morning and wish you’d stuck to plan A, asks my colleague Larry Elliott mischievously.
Fighting off a fit of the giggles, Carney replies that he doesn’t wake up in the morning any more, he wakes up in the middle of the night.Fighting off a fit of the giggles, Carney replies that he doesn’t wake up in the morning any more, he wakes up in the middle of the night.
But obviously he doesn’t regret agreeing to extend his stint at the BoE, and it’s a privilege to do the job, he replies sincerely (I think!).But obviously he doesn’t regret agreeing to extend his stint at the BoE, and it’s a privilege to do the job, he replies sincerely (I think!).
The rebalancing of the UK economy has paused, Carney warns. Consumption is providing the bulk of the growth again as business investment takes a Brexit hit.The rebalancing of the UK economy has paused, Carney warns. Consumption is providing the bulk of the growth again as business investment takes a Brexit hit.
BOE'S CARNEY SAYS POSITIVE REBALANCING OF UK ECONOMY AWAY FROM CONSUMPTION HAS PAUSED || SAYS UK INVESTMENT SHORTFALL SINCE REFERENDUM IS AN ABSOLUTE OUTLIER BY INTERNATIONAL STANDARDSBOE'S CARNEY SAYS POSITIVE REBALANCING OF UK ECONOMY AWAY FROM CONSUMPTION HAS PAUSED || SAYS UK INVESTMENT SHORTFALL SINCE REFERENDUM IS AN ABSOLUTE OUTLIER BY INTERNATIONAL STANDARDS
Q: Back to Brexit.. is no-deal more likely, and do you think the departure date could be extended?Q: Back to Brexit.. is no-deal more likely, and do you think the departure date could be extended?
Yes, Mark Carney replies, the probability of a no-deal Brexit has gone up. There are seven weeks until the Brexit data, and there still are a lot of possibilities.Yes, Mark Carney replies, the probability of a no-deal Brexit has gone up. There are seven weeks until the Brexit data, and there still are a lot of possibilities.
He says some senior cabinet ministers have speculated about delaying Brexit beyond 29 March, and that some parliamentary experts have speculated that there isn’t enough time to get all the legislation through.He says some senior cabinet ministers have speculated about delaying Brexit beyond 29 March, and that some parliamentary experts have speculated that there isn’t enough time to get all the legislation through.
But Carney adds that Theresa May has been adamant that the UK will leave the EU on 29 March.But Carney adds that Theresa May has been adamant that the UK will leave the EU on 29 March.