Brexit deterred UK investment

A tough Brexit will create a disruptive environment for British companies, warned the governor of the central bank.

The head of the central bank also said that the uncertainty surrounding the transition agreement and the final outcome of Brexit had had a "chilling effect" on investments in the UK.

Central bank governor Philip Lane said the support of the draft withdrawal agreement would provide guidance to businesses.

Addressing the Bankers Institute in Dublin today, Mr Lane has exposed the consequences of a Brexit without agreement.

"In a sense, the ratification of the withdrawal agreement would give companies some guidance on the overall trajectory of future relations between the UK and the EU27, although many will remain uncertain until the end of the year. conclusion of negotiations on the post-transition environment, "he said. I said.

"As a result, signing the withdrawal agreement could free up UK business investment by reducing uncertainty," he added.

"In the other way, a hard Brexit would constitute a much more disturbing environment, given the lack of clarity on the future relationship between the UK and the EU27 in the context of a tough Brexit and the absence of a roadmap indicating how this future relationship will be negotiated, "Lane said.

"In addition, while preserving the common area of ​​travel between Ireland and the United Kingdom, restrictions on the free movement of persons between the United Kingdom and the EU27 will disrupt the functioning of labor markets , given the high levels of two-way mobility that have developed over the last 40 years, "he added.

"Beyond the implications for citizens, the reduced mobility of the workforce will also affect the dynamics of different sectors over the next few years."

He added that a boost to productivity from specialized talent pools in specific sites would be "compromised" by restrictions on labor mobility.

"While some of these costs will only come after the transition, companies, households and prospective investors have already reacted in different ways since the referendum," he said.

"One of the main mechanisms of adjustment has been the significant weakening of the pound sterling against the euro, which constitutes a deterioration of the terms of trade for the countries. British residents It is also believed that UK companies have already started to move away from EU-oriented export strategies, in anticipation of future trade barriers, "added the head of the central bank. .

An extreme Brexit could be worse than the financial crisis for the UK – Bank of England

Earlier, the governor of the Bank of England, Mark Carney, had declared that it was in the interests of Britain to conclude a transition agreement with the European Union, whatever form the Brexit takes.

"It's in the country's interest to have a little time to move on to any relationship," Carney said in a BBC radio interview.

His comments came a day after the central bank published many Brexit scenarios that banks might face.

The Bank of England said yesterday that Britain was likely to suffer even more from its economy than during the global financial crisis of 10 years ago, if she left the European Union in the worse Brexit scenarios in four months.

A few hours after the government issued its own warning regarding a Brexit without agreement, the Bank of England said that the economy could contract by 8% in about a year.

The two reports could further pressure lawmakers to abandon their opposition to the Brexit deal that Prime Minister Theresa May concluded with other European leaders on Sunday, which is far to be certain to be approved in Parliament on December 11th.

However, supporters of a more definitive break with Brussels quickly dismissed the news as alarmist.

Proponents of closer relations said the forecasts showed that the promises of greater prosperity outside the EU were untrue.

The Bank of England said that the "messy" scenario – involving long delays at the British borders and the loss of confidence of the financial markets towards UK institutions – was not its basic scenario.

But if that happens, the value of the British pound would drop by 25% – which would bring it closer to parity with the dollar – an increase of inflation from around 2.4% to 6.5% at present and an increase of interest rate.

House prices would fall by 30%.

The sterling dropped its previous gains yesterday as the Bank of England presented its different scenarios.

She said that a Brexit simply "disruptive", with goods crossing borders but facing tariff and other barriers, would result in a 3% drop in gross domestic product.

"Our job is not hoping for the best, but to prepare for the worst," said at a press conference the Governor of the Bank of England, Mark Carney, pointing out that UK banks could face the worst shock caused by Brexit.

An agreement that would keep Britain and the EU in a near future relationship could lead to faster economic growth than that predicted by the BoE earlier this month, the bank said.

But all the scenarios of the Bank of England badumed that interest rates would rise.

In the worst case, the rates could rise to 5.5% – a level comparable to that of 2007, before the financial crisis – from the current base rate of 0.75%.

A few hours earlier, the government had acknowledged that any Brexit option would be worse for the economy than staying in the EU, but said that leaving the block without any agreement with Brussels would weigh heavily on growth at least in the years 2030.

On the other hand, May's May-approved plan with EU leaders "will result in a result very close to the economic benefits of staying there," said Finance Minister Philip Hammond.

The reports from the government and the Bank of England sparked angry reactions from uncompromising Eurosceptics, who viewed these statements as a repetition of dreadful official warnings intended to influence voters ahead of the 2016 referendum.

"I'm afraid we're ready for Project Fear 2.0," said former Brexit Minister David Davis, who resigned in July to protest against May's plans.

Andrew Sentance, a former interest rate fixer from Bank of England, challenged the scenario in his worst case scenario.

"Does anyone really think this is a real world scenario?" he said. "The Bank of England undermines its credibility and independence by attaching such importance to these extreme scenarios and forecasts."

Mark Carney denied the accusation of alarmism.

"Parliament has asked for this badysis," he said. "This is not supposed to scare people, it is supposed to rebadure, even if it happens, which is unlikely, the system is more than ready for that."

Opponents of Brexit said the projections belied the promises made by Brexit activists before and after the referendum.

According to a government report, in a scenario based on the Brexit plan announced in May in July, rather than on Sunday's modified deal with EU leaders, domestic production would be lower by 2.1 % in a little more than 15 years that Britain would stay in the bloc. .

If there was no agreement, it would be 7.7% smaller.

Assuming zero net migration from the EU in the future, the impact on the economy would be heavier: 3.9% in the framework of the agreement of the EU. May and 9.3% without agreement.

The report says that the British automotive and chemical sectors are facing the largest potential losses of a Brexit without agreement – more than 20% of production.

Brexit supporters believe that the May deal will penalize Britain in the long run by making it more difficult to enter into trade agreements with faster growing countries and regions located outside the United States. Europe, and it is unlikely that legislators will be influenced by the latest forecasts.