Reaction from Global Britain to Treasury and Bank of England speculations
Yesterday both HM Treasury and the Bank of England issued their assessment of the impact of various BREXIT scenarios and in particular ‘no deal BREXIT.’ We are at a complete loss to understand both their logic and reasoning.
The Bank of England’s worst case outcome for a no deal BREXIT, in particular, is inexplicable. Its suggestion that no deal would cause an 8% fall in GDP, a 25% fall in Sterling and a 30% fall in house prices is in our view so absurd as to demean its reputation.
Further, to suggest the Bank would raise rates to 5.5%, under that scenario, is the opposite of what it did during the financial crisis when it lowered rates as growth fell. Why the different response today? It is possible business has not heard Mark Carney’s warning, but first thing today Sterling was stable against the USD at $1.28, slightly higher than just after the EU referendum and the FTSE 100 was up strongly.
Next week, and well before the vote on the Prime Minister’s proposal, Global Britain will be publishing its own economic analysis, and while we don’t want to spoil the punch line today you can be assured that both the Treasury and Bank of England forecasts are, in our view, eccentric.
We would like to remind readers that the Treasury predicted an immediate drop of 5% of GDP and 800,000 job losses in the event of a vote to leave the EU. The actual outcome has been GDP growth of over 3% and over 600,000 new additional jobs since the referendum. That 8% swing is equivalent to over £160bn.
As a point of reference Global Britain argued before the referendum that a vote to leave would have a minimal impact on the economy with a modest positive longer term impact assuming reasonably open and stable fiscal and regulatory policies were followed. In the event the British economy has performed even better than we predicted.
We are sorry to say forecasts of the nature given yesterday by HM Treasury and the Bank of England undermine confidence in Government agencies, breach trust and risk damaging confidence.
Ewen Stewart and Brian Monteith