Carney warns Brexit uncertainty is building

The governor of the Bank of England has warned that uncertainty over Brexit is already weighing on the economy. Mark Carney’s comments came as the Bank voted to hold rates and cut growth forecasts.It edged this year’s growth forecast down to 1.7% from its previous forecast of 1.9% made in May. It also cut its forecast for 2018 from 1.7% to 1.6%.Sterling dropped to a nine-month low against the euro after the downward revision to the growth forecasts. The pound fell about 0.76% to 1.1063 euros.The bank voted 6-2 to keep interest rates on hold at 0.25%. They have been at that level since August last year. Mr Carney said that business investment was slower than it would have been expected to be because of Brexit.“It’s evident in our discussions across the country with businesses,” he said, “that uncertainties about the eventual relationship are weighing on the decisions of some businesses.” He said that investment had been weaker than otherwise would have been expected “in a very strong world” and the consequences of that was starting to build: “The speed limit of the economy, if you will, has slowed.” Mr Carney said the Bank expected business investment to pick up from its current “very subdued” levels, but that it was still below historic rates.He added that Brexit uncertainty was also hitting pay negotiations. “There is an element of Brexit uncertainty which is affecting the wage bargaining. Some firms, potentially a material number of firms, are less willing to give bigger pay rises given that it is not as clear what their market access is going to be over the course of the next few years,” he said. Leave campaigner and former British Chambers of Commerce director general John Longworth said he agreed that business confidence is “lower than it ought to be”. Mr Longworth added that Bank of England was “notoriously bad at forecasting”, so “we should always take it with a pinch of salt”.—Agencies

Share this post

    scroll to top