Carney weighs in on Brexit
The influential Governor of the Bank of England, Mark Carney, stepped forcefully into the Brexit debate yesterday. Though his views on the issue were never really in doubt, Carney has now explicitly said leaving the EU could result in long-term damage to the pound and even a technical recession. This is a serious warning from a well-respected figure. Polls indicate the Governor’s words could count for a great deal with many voters.
Some in the Brexit camp dismiss the question of economic growth and acknowledge the potential short-term damage of leaving. They claim this should not be the single most important issue and that Britain will bounce back over the longer-term. This response might sound reckless in the context of slowing growth in the UK, with unemployment rising and the Chancellor’s long-term economic plan seemingly under threat. First quarter growth in declined by 0.2% from Q4 2015 to 0.4%. Q2 results are not expected to be any stronger as the three core sectors of manufacturing, services and construction all dip.
If the key reason for this slow-down is indeed the threat of Brexit, then we should see a bounce back in Q3 if Remain prevails. But not all commentators are as convinced about the Government’s linkage between economic slowdown and Brexit. There are more underlying problems in the British economy dating back to last summer, when Britain’s manufacturing and construction industries effectively reached a standstill. Whatever the cause, everyone is agreed that uncertainty is not a good thing. The Chancellor faces a serious challenge in rejuvenating the British economy, but until the referendum is out of the way, it is hard for him to begin the task.