Published: Thu, November 29, 2018
Markets | By Otis Pena

May won't rule out no-deal Brexit; bank says firms not ready

May won't rule out no-deal Brexit; bank says firms not ready

But its gloomiest forecast, which assumed the United Kingdom leaves the European Union in March with no agreement in place and significant disruption ensues, forecast that GDP would be up to 10.5% lower in five years' time - equivalent to £245bn - than if the United Kingdom had stayed in the EU. Carney added: "To be clear the Bank is ready for Brexit..." But his assessment enraged Brexiteers and business analysts who said the 53-year-old Canadian was doing more harm by scaremongering about an economic disaster.

Mr Rees-Mogg said "project fear" had become "project hysteria". Now they warn of the death of the first born. This finding was also echoed by the Bank of England's report.

Tory MP Priti Patel blasted: "The Bank of England is undermining its credibility and independence by giving such prominence to these extreme economic forecasts and scenarios".

Speaking at the SMMT's annual dinner, where the survey results were announced, chief executive Mike Hawes said: "Frictionless trade as part of the EU single market and customs union has driven the success of the United Kingdom automotive industry so the fact we are leaving is already painful, and already causing damage". Today he says they will rise.

The Bank of England also examined several different scenarios.

The Bank's report came under fire from a former member of its Monetary Policy Committee, Andrew Sentance, who described it as "highly speculative and extreme" and said it would "add to the view that the Bank is getting unnecessarily involved in politics".

The scenario which most closely reflects the Government's plan would see the Chequers deal tempered by some trade friction and with zero net immigration from Europe.

In the event of a disorderly no deal, no transition Brexit, Britain's GDP could fall by 8%, according to a worst case scenario analysis by the Bank. This is an independent analysis that they have put out.

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"It shows we will be better off with this deal".

Filippo Alloatti, a senior credit analyst at Hermes Investment Management, said: "The stress test results have highlighted banks" ability to absorb a "cliff-edge' Brexit, given [the tests] are likely to be worse than even the most nightmarish of Brexit outcomes".

In a disorderly Brexit scenario, the bank said United Kingdom trade would decline sharply while the economy will be dragged down by lower labour supply and productivity.

The unemployment rate would rise to 7.5 per cent, inflation would surge to 6.5 per cent while interest rates would rocket as high as 5.5 per cent. "The level of preparedness of businesses and infrastructure, infrastructure such as ports, customs systems and transportation operations, will be important determinants of how well the economy adjusts to new trade barriers".

The Bank's doomsday analysis comes hours after the Government released its own impact assessment, which found that withdrawal from the European Union under Theresa May's plans could cut the UK's GDP by up to 3.9% over the next 15 years.

In an interview with the BBC on November 28, McDonnell said it was "inevitable" a second referendum would be called in such a scenario.

With a no-deal Brexit, the hit to the economy would be 9.3%.

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