A NO Deal Brexit won’t be as bad as first thought, according to the Bank of England governor and the boss of German business.
Mark Carney said the Government’s accelerated contingency planning had reduced the economic damage that could follow a no deal exit.
In November the Bank of England warned that Britain would be tipped into a recession worse than the financial crisis in a no deal scenario – with GDP falling by 8 per cent.
But yesterday Mr Carney told the Lords Economic Affairs committee that “constructive developments in terms of preparedness” meant the economy may be 2 to 3.5 per cent lower than expected.
Meanwhile Dieter Kempf, head of Germany’s biggest industry group the BDI, said delaying Brexit could be even more damaging than no deal.
He said: “The Brexit issue hurts us a lot in Germany and the Netherlands. Our economies are hit hard.
“My experience is that the economy can live better with bad conditions than with uncertainty.”
Mr Carney warned that no deal was still likely to deliver a “material economic shock”.
But he said: “Since we released those scenarios in November there have been some constructive developments in terms of preparedness – some of them have been detailed over the course of the last few weeks in terms of broader parliamentary testimony.”
‘UNCERTAINTY IS BAD FOR THE ECONOMY’
Mr Carney explained: “If you took the scenarios that we had for a no-deal Brexit and you referenced the disruptive and the disorderly, and it depends what your counterfactual is – so what are we comparing it to – if we compare those as we did in November to our forecast of the economy at the time which presumed something broadly consistent with the Prime Minister’s deal… the potential hit to GDP was just under 5% in the disruptive and just under 8% in the disorderly.
“The items I indicated earlier, given our modelling of the situation, would pull back somewhere between 2% to 3.5% of those losses depending on the scenario.”
He added: “There has been progress in preparedness and that reduces the level of the economic shock.”
Meanwhile the head of the civil service in Northern Ireland said that a no deal Brexit could cause a sharp rise in unemployment in the region.
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Inability to prepare, EU tariffs and significant changes to exports could cause business distress, failure or the relocation of some companies to the Republic, a report from David Sterling said.
He added: “The consequences of material business failure as a result of a ‘no-deal’ exit, combined with changes to everyday life and potential border frictions could well have a profound and long-lasting impact on society.
“The planning assumptions include the possibility that, in some scenarios, a no-deal exit could result in additional challenges for the police if the approach appeared to be unfair or unreasonable for some of those most affected.”
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