Business

No-deal recession less severe now, says central bank boss

Mark Carney Image copyright Getty Images

A no-deal exit from the EU would probably see the economy shrink by less than previously estimated, Bank of England Governor Mark Carney has said.

Mr Carney told MPs that preparations made since the central bank's last estimate in November have softened its worst-case scenario.

A disorderly Brexit will now probably see the economy shrink by 5.5% rather than the 8% forecast before.

He said more time to prepare could cut the damage further.

Better border preparations, a temporary deal for financial services companies to access UK markets, and a deal on the market for financial insurance products, have all been put in place since November, he told the Treasury Select Committee.

"The impact of that has been to reduce the worst case scenario."

Food prices

As well as a 5.5% drop in economic output, the UK can expect unemployment to rise to 7% and inflation peak at 5.25% - estimates which are less than one percentage point lower than the November estimates.

He also said the economy was slowing to a snail's pace as companies shun new customers, hiring and investment ahead of Brexit.

The impact on food prices will also be less hit than previously estimated.

In November, a weaker pound and tariff costs were assumed amount to a 10% rise in food costs, under the worst-case scenario. This may now be 5-6%.

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