Saturday, November 05, 2022
Pointing the finger at Brexit
There were some interesting comments yesterday from Mark Carney, who oversaw the Bank of England as Governor during the 2016 referendum and repeatedly warned leaving the EU would damage the economy.
He argued that Brexit is one of the main reasons Britain has been sucked into a prolonged tide of inflation, and the ongoing onslaught of rising prices and stagnant wages is ‘what we said was going to happen’.
THe Metro says that Carney acknowledged that other countries face similar difficulties due to spiralling global energy prices and the aftereffects of Covid, but he said the UK faces the ‘rare’ and ‘very difficult reality’ of having to sharply hike interest rates while on the cusp of its longest recession in 100 years.
Specifically on Brexit, he said:
Leaving the EU has also ‘slowed the pace at which the economy can grow’ by causing a ‘long-standing shock to productivity’, Mr Carney argued.
Research by the Resolution Foundation think-tank in June found that Brexit has led to an 8% fall in Britain’s trade openness, which in turn is reducing productivity and workers’ wages.
It predicted that productivity will fall by 1.3% by the end of the decade due to changes in trading rules alone, with output in the fishing industry likely to fall a whopping 30%.
The notion that Brexit has significantly fuelled inflation is not widely shared by economists, and there has been no major research behind it. But weaker wage growth is known to make it harder for families to afford rising prices.
Speaking of the producitvity fall, Mr Carney said: ‘It was predicted that we would get that, it’s coming to pass.’
The former governor did not give specifics on the scale of Brexit’s effect, although doubled down on claims he made last month on the matter.
He told the FT he wouldn’t give a ‘value judgment’ on the matter but had simply this to say: ‘In 2016 the British economy was 90% the size of Germany’s. Now it is less than 70%.’
We really do need a bigger bus.
THe Metro says that Carney acknowledged that other countries face similar difficulties due to spiralling global energy prices and the aftereffects of Covid, but he said the UK faces the ‘rare’ and ‘very difficult reality’ of having to sharply hike interest rates while on the cusp of its longest recession in 100 years.
Specifically on Brexit, he said:
Leaving the EU has also ‘slowed the pace at which the economy can grow’ by causing a ‘long-standing shock to productivity’, Mr Carney argued.
Research by the Resolution Foundation think-tank in June found that Brexit has led to an 8% fall in Britain’s trade openness, which in turn is reducing productivity and workers’ wages.
It predicted that productivity will fall by 1.3% by the end of the decade due to changes in trading rules alone, with output in the fishing industry likely to fall a whopping 30%.
The notion that Brexit has significantly fuelled inflation is not widely shared by economists, and there has been no major research behind it. But weaker wage growth is known to make it harder for families to afford rising prices.
Speaking of the producitvity fall, Mr Carney said: ‘It was predicted that we would get that, it’s coming to pass.’
The former governor did not give specifics on the scale of Brexit’s effect, although doubled down on claims he made last month on the matter.
He told the FT he wouldn’t give a ‘value judgment’ on the matter but had simply this to say: ‘In 2016 the British economy was 90% the size of Germany’s. Now it is less than 70%.’
We really do need a bigger bus.
