Mark Carney doubles down on claim that Brexit has shrunk UK economy

Mark Carney, the former Bank of England governor and now the UN special envoy for climate action and finance, attends the opening of Finance Day at the COP26 UN Climate Summit in Glasgow. (AFP via Getty Images)
Mark Carney, the former Bank of England governor and now the UN special envoy for climate action and finance, attends the opening of Finance Day at the COP26 UN Climate Summit in Glasgow. (AFP via Getty Images)

Former Bank of England governor Mark Carney has defended his bleak warnings that Brexit would devalue sterling and add to inflation ahead of a recession.

He doubled down on his assertion that the UK economy had shrunk to less than 70% of Germany since Brexit. It came the day after the Bank of England hiked interest rates to 3 per cent causing misery for homeowners.

“Sterling moved against all major currencies from the point at which the referendum was called, and then it moved more sharply after the referendum result,” Mr Carney said.

“It hasn’t recovered. It’s fluctuated around but it has not recovered,.”

He told BBC Radio 4: “This is what we said was going to happen, which is that the exchange rate would go down, it would stay down, that would add to inflationary pressure, the economy’s capacity would go down for a period of time because of Brexit, that would add to inflationary pressure, and we would have a situation – which is the situation we have today – where the Bank of England has to raise interest rates despite the fact that the economy is going into recession.”

Addressing criticism of his claim, made first in the Financial Times, that Brexit had seen the UK economy shrink from 90% the size of Germany’s to “less than 70%”, Mr Carney said: “The question is the purchasing ability, the international weight of the economy, which was [pre-Brexit] at a different level relative to the German economy, relative to the Canadian economy, relative to other economies than it is today.

“That structural shift is in part what the government and all of us are dealing with in the UK. We’ve had a big hit to our productivity … the speed limit of the economy as well as the level of the economy, and we have to take some tough decisions in order to get it back up and that is one of the consequences of a decision taken a few years ago.”

Mr Carney said the UK was facing a “long-standing shock to productivity in the economy”, which he said was predicted would be an outcome of Brexit.

It came as the Bank of England piled mortgage misery on thousands of homeowners and first time buyers with the biggest rise in interest rates in more than 30 years on Thursday.

The Bank took the action as it warned Britain is heading for its longest recession in modern history with no recovery until summer 2024.The recession is not predicted to be as deep as the downturn that followed the financial crisis of 2008.

Downing Street, however, insisted the economic challenges have been caused by the coronavirus pandemic and Vladimir Putin’s war in Ukraine, declining to comment on the affect of Brexit.

“Our focus is on ensuring we have stability and fiscal credibility. That’s what the Chancellor and the Prime Minister are focused on rather than on a decision taken a number of years ago where people made a clear decision,” the official spokesman said.