Bank of England's Carney spells out no-deal Brexit hit to UK
* Carney says Brexit "first test of a new global order"
* Says weaker pound would not mask hard Brexit hit to income
* Global growth likely to stabilise - Carney
By David Milliken and Andy Bruce
LONDON, Feb 12 (Reuters) - Bank of England Governor Mark
Carney warned on Tuesday of the potential shock to Britain's
economy from Brexit which could serve as an "acid test" for
countries around the world trying to respond to the challenges
The United Kingdom is on course to leave the European Union
on March 29 without a deal, unless Prime Minister Theresa May
can convince the bloc to amend the deal she agreed in November
and then sell it to sceptical British lawmakers.
"We shouldn't be under any illusions," Carney said,
answering audience questions after a speech at a Financial Times
event. "A no-deal, no-transition Brexit would be an economic
shock for this economy ... and it would also send a signal
globally about the prospects of refounding globalisation."
"In many respects, Brexit is the first test of a new global
order and could prove the acid test of whether a way can be
found to broaden the benefits of openness while enhancing
democratic accountability," he said.
Carney said a successful Brexit deal could lead to a new
form of international trade built on a better balance between
local and supranational interests.
But a no-deal Brexit would hit living standards in Britain,
at least in the short term, and a fall in the value of the pound
would not solve the economy's problems as suggested by some
"That's part of the necessary adjustment mechanism but it is
not a step to prosperity. It is a hit to income," Carney said.
Carney, a Canadian, has previously warned of the risks that
Brexit poses to the United Kingdom, the world's fifth-biggest
economy, earning him the ire of some anti-EU campaigners.
"People are tired of Carney's gloomy, inaccurate,
anti-Brexit predictions," said Richard Tice, co-chairman of
campaign group Leave Means Leave. "Does he want us to fail so he
is proven right? It's time he resigned and went home."
By contrast, John McDonnell, the would-be finance minister
of the main opposition Labour party, said Carney's remarks
showed why the government should take a no-deal Brexit off the
Most of Carney's speech focused on the outlook for the
global economy. He said growth was likely to stabilise at a new,
slower pace, although China, trade wars and rising protectionism
threatened the "delicate equilibrium".
Britain could be seen as a "leading indicator" of a reversal
of globalisation and if that uncertainty took hold elsewhere, it
could undermine the global economy, Carney said.
Rising debt in China was also a "significant and growing"
risk. But the most likely outcome was that the world economy
would not slow much further, he said.
"While there are pockets of risk and global growth is still
decelerating, the combination of the policy response and the
state of the current imbalances in advanced economies suggest
that global growth is more likely than not to stabilise
eventually around its new, modest trend," Carney said.
He also took a swipe at U.S. President Donald Trump who said
trade wars were "good, and easy to win" last year. "Contrary to
what you might have heard, it isn’t easy to win a trade war,"
(Writing by Andy Bruce;
Editing by Gareth Jones and Alison Williams)
First Published: 2019-02-12 16:46:37
Updated 2019-02-12 19:17:24
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