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Analysis

Carney clarifies Brexit economic burden – and quadruples it

by Luke Lythgoe | 26.01.2018

The Bank of England governor has denied telling business leaders at Davos that the Brexit vote was costing the UK £200 million a week in lost economic growth. Mark Carney instead suggested the hit to economic growth by the end of the year could be almost quadruple that – although he didn’t actually do the maths himself.

Carney told the BBC’s Mishal Husain (listen from 1:10:00) that he didn’t say the Brexit vote was “costing the UK economy around £10bn a year”. He explained that today the economy was “a percentage point less in size than we expected just before the vote” and that by the end of the year “probably two percentage points lower”. This, he said, works out as “tens of billions of pounds” less economic activity per year.

It’s easy to be a bit more precise. After all, the UK’s GDP this year will be £1,924 billion, according to the IMF forecast that Carney mentioned. If he’s right that Brexit has caused a two percentage point hit, our GDP would instead be £1,963 billion this year. In other words, we’ll be £39 billion poorer – a hit of £750 million per week.

Not only does this dwarf the “overheard at Davos” figure, it also pours yet more cold water on Boris Johnson’s lie that £350 million is coming our way as we “take back control” of money we send to the EU budget. Although the £750 million figure isn’t directly comparable to the foreign secretary’s false promise, a smaller economy will mean less money to spend on the NHS and other public services.

What’s more, this is all before we’ve even quit the EU. It’s hard to know how bad that will be because Cabinet ministers are fighting like ferrets in a sack and the prime minister hasn’t a clue what sort of Brexit she wants. But it’s not going to be pretty.

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Edited by Hugo Dixon

One Response to “Carney clarifies Brexit economic burden – and quadruples it”

  • It really annoyed me that what Carney said was hardly reported anywhere.
    Nevertheless, your article’s conclusion is wrong. What Carney said was that it lost tens of billions – 1% expected to be 2% in terms of lost ESTIMATED GROWTH. What you have calculated is based on the idea that the economy has/ will shrink. That isn’t what he was saying. He was saying that the economy is still growing, but it is growing at a rate which is slower than they predicted before the vote. If the economy were to shrink for six months, we would be in a recession, which we aren’t (yet)

    (Nevertheless, he did say that despite the conditions being right for investment, other developed economies are growing at a rate in double digits, whereas the U.K. is only growing in the low single digits – hardly a good augury.)