Mark Carney rarely shies away from expressing strong opinions, but the Governor of the Bank of England is facing a backlash over a blunt Brexit analysis that has led to calls that he’s hysterical, incompetent and a “failed, second-tier Canadian politician.”
Mr. Carney has been under fire since Wednesday when the central bank released a detailed report on how Britain will fare after the country leaves the European Union on March 29. The study examined several scenarios including the possibility of the country crashing out of the EU without any agreement on trade or other matters. Under that scenario, the bank said that within five years Britain’s economy would shrink by 8 per cent, house prices would fall by 30 per cent, unemployment would nearly double to 7.5 per cent, the pound would lose 25 per cent of its value and inflation would soar to 6.5 per cent. That’s a far worse hit than the country experienced after the 2008 financial crisis.
“Our job is not to hope for the best but to prepare for the worst,” Mr. Carney told reporters after releasing the assessment. “We have looked at a potential no-deal, no-transition Brexit ... the reason we do that is to be prepared for all eventualities.”
On Thursday he went further, telling the BBC that British businesses were largely unprepared for a no-deal Brexit. “Less than half of the businesses in the country have initiated their contingency plans for a no deal Brexit,” he said, citing the bank’s contacts with businesses and other surveys. He stressed that the no-deal scenario was unlikely and that Britain’s financial system could withstand the turmoil. And he took pains to say that he wasn’t advocating government policy but simply responding to a request for information from Parliament.
That did little to quell the criticism. Several pro-Brexit members of Parliament attacked Mr. Carney for being hysterical, politicizing the central bank and seeking to undermine a hard Brexit. “It is unusual for the Bank of England to talk down the pound and shows the Governor’s failure to understand his role. He is not there to create panic,” said Tory MP Jacob Rees-Mogg. “Unfortunately, he’s a second-tier Canadian politician. Having failed in Canadian politics, he’s got a job in the U.K., which he isn’t doing well.” Another pro-Brexit Tory MP, Bernard Jenkin, said Mr. Carney had trashed the economy “as part of a propaganda exercise.”
It wasn’t just politicians piling on. Nobel Prize winning economist Paul Krugman also weighed in. “I’m anti-Brexit, and have no doubt that it will make Britain poorer,” Mr. Krugman said in a series of posts on Twitter. “And the [Bank of England] could be right about the magnitude. But they’ve really gone pretty far out on a limb here … their bad-case losses from a no-deal Brexit look extremely high.” Mr. Krugman, who is based in New York, has been a critic of many of the dire economic forecasts surrounding Brexit, suggesting that economists’ claims have been dubious.
Andrew Sentance, a former member of the bank’s rate-setting monetary-policy committee, also criticized the report, calling it bogus and “highly speculative.” The report “will add to the view that the bank is getting unnecessarily involved in politics and that will further undermine perceptions of its independence and credibility,” Mr. Sentance said on Twitter.
But the report won the backing of Prime Minister Theresa May, who has been scrambling to win support for a Brexit deal she has struck with the EU. That agreement, which calls for a transition period and close economic ties to the bloc, will be put to a vote in the House of Commons on Dec. 11, and so far few MPs expect it to pass. Ms. May has argued that if MPs don’t support her deal, the country risks the chaos of a no-deal Brexit, and she has cited the bank’s report as evidence of what could happen.
This isn’t the first time Mr. Carney has run into controversy over Brexit. Just before the 2016 referendum on Britain’s membership in the EU, he warned the country could fall into a technical recession if it left. That prompted anger from many pro-Brexit Tories, who have since noted that the economy has performed better than expected since the vote.
On Thursday, Mr. Carney refused to back down and defended the bank’s analysis. “We have a responsibility to have the system ready for whatever happens,” he told the BBC. “In order to do that we need to do this type of analysis.”
He also has a bit more at stake personally in Brexit. While he still holds Canadian citizenship, he became a British citizen as well last week. He told reporters on Wednesday that his new status hasn’t made him any more or less comfortable about speaking out on important issues. “I feel as comfortable as I’ve ever done talking about Brexit or any other issue facing the U.K.,” he said.