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Abu Dhabi, UAEThursday 13 December 2018

UK central bank issues dire warnings of no-deal Brexit

British businesses are unprepared for a failure of prime minister’s Brexit plan

Prime Minister Theresa May gives evidence before MPs over her much-criticised Brexit deal. AP
Prime Minister Theresa May gives evidence before MPs over her much-criticised Brexit deal. AP

British businesses are unprepared for a worst-case Brexit scenario that could plunge the country into a more severe recession than the one that followed the 2008 global financial crisis, the head of the central bank warned on Thursday.

Bank of England governor Mark Carney said that less than half of businesses had begun contingency planning in the event of prime minister Theresa May’s Brexit deal being voted down by parliament and the UK crashing out of the EU without an agreement on future trading relations. The pound tumbled 0.4 per cent on Thursday against both the euro and dollar over Brexit concerns.

Mr Carney's comments followed a warning from the Bank that the UK could see an eight per cent cut in GDP, unemployment up by 7.5 per cent and house prices falling by nearly a third if there was no deal.

A separate cross-Government analysis found the UK would be more than nine per cent smaller after 15 years under a no-deal scenario compared with remaining in the European Union. It also saw the pound, worth $1.28 on Thursday, potentially falling below parity.

“All the industries, all the infrastructure of the country, are they all ready at this point in time? And, as best as we can tell, the answer is no,” Mr Carney told the BBC on Thursday.

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Britain’s biggest carmaker Ford said a no-deal would be a “catastrophe” and the current deal should be approved. “It’s important that we get the agreement ratified that’s on the table at the moment,” said Ford Europe boss Steven Armstrong.

Mrs May was heading to the G20 meeting of world leaders in Argentina on Thursday after being questioned by MPs over the deal her team struck with EU negotiators. The agreement has been approved by EU leaders but has come under fire from political parties from all sides and is unlikely to secure parliamentary approval.There was little sign of her critics in parliament swinging around to support her with some lawmakers from the ruling party and the main opposition calling for a second referendum in an eleventh-hour attempt to reverse the Brexit process.

Mrs May has repeatedly refused to support a second referendum and the failure of her plan next month is likely to lead to further financial turmoil with few clues to what might replace the deal.

She told MPs on Thursday that any attempt to extend Britain’s membership of the EU beyond March 29, 2019, or to hold a second vote would be an attempt to “frustrate” Brexit. She has agreed to take part in a televised Brexit debate next month to promote her deal and embarked on a frantic series of visits across the country to try to sell her deal to voters.

One of the leading Brexiteers Jacob Rees-Mogg described Mr Carney’s intervention as “Project Hysteria” over its financial warnings. “The Bank of England has gone from being discredited to being hysterical,” he told The Telegraph newspaper.

In rare positive news for the premier, one of her ministers who had been tipped to quit the cabinet over Mrs May’s deal with Brussels indicated that she would support Mrs May.