THE UK will be worse off after Brexit, Bank of England Governor Mark Carney confirmed yesterday.
According to Carney, leaving the EU will result in “weaker real income growth”, job losses and price rises.
Speaking after three Bank policy-makers called for a rate rise amid warnings that Brexit-fuelled inflation will surge over the summer, Carney said: “From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.”
Last week the bank’s monetary policy committee kept interest rates on hold at 0.25 per cent, but Ian McCafferty, Michael Saunders and Kristin Forbes all voted for a rise to 0.5 per cent, marking the first time three members have dissented for more than six years.
It came after inflation hit 2.9 per cent in May, the highest level in nearly four years and far above expectations.
The pound sank against both the dollar and euro on the news.
Yesterday Carney said the UK would soon “begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption”.
He said: “Since the prospect of Brexit emerged, financial markets, notably sterling, have marked down the UK’s economic prospects.
“Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU.
“But it can influence how this hit to incomes is distributed between job losses and price rises.”
Earlier, Chancellor Philip Hammond said immigration to Britain would be managed but not “shut down” after a “jobs first” Brexit.
In a keynote speech to City leaders, Hammond again signalled his “soft Brexit” credentials by stressing Britain would leave the EU “in a way that prioritises British jobs and underpins Britain’s prosperity”.
The address will be interpreted as a fresh marker in an internal Cabinet battle over Brexit, with Hammond apparently favouring an approach that puts businesses first while colleagues, including Theresa May, have made immigration controls a red line for negotiations.
Hammond said he was not turning a “blind eye” to a “growing tide of hostility” against globalisation and mass immigration, and stressed he would push for a new phase of world trade that “delivers clear benefits for ordinary working people”.
He added: “We are not about to turn inward. But we do want to ensure that the arrangements we have in place work for our economy.
Just as the British people understand the benefits of trade, so too they understand how important it is to business to be able to access global talent and to move individuals around their organisations.
“So while we seek to manage migration, we do not seek to shut it down.”
Hammond insisted the economy must be a priority in Brexit talks, saying: “When the British people voted last June, they did not vote to become poorer, or less secure.
“They did vote to leave the EU. And we will leave the EU. But it must be done in a way that works for Britain in a way that prioritises British jobs, and underpins Britain’s prosperity.
“Anything less will be a failure to deliver on the instructions of the British people.”
Hammond also underlined his three priorities for a “Brexit for Britain”. They include a comprehensive free trade agreement for goods and services, transitional arrangements “to avoid unnecessary disruption and dangerous cliff edges”, and “frictionless customs arrangements” for cross-border trade and “crucially” to maintain the “open and free-flowing” Irish border.
On the complexities involved, he conceded: “To do this in the context of our wider objectives will be challenging.
“It will almost certainly involve the deployment of new technology.
“And therefore we’ll almost certainly need an implementation period, outside the customs union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running.”
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