BoE warns on heightened no-deal Brexit prospect

The prospect of Britain crashing out of the European Union without a deal has risen since last month, the Bank of England warned yesterday, as it kept interest rates unchanged. “Domestically, the perceived likelihood of a no-deal Brexit has risen” since May, the BoE said in a statement after its Monetary Policy Committee (MPC) kept the central bank’s main borrowing cost at 0.75 per cent. “Since the Committee’s previous meeting... downside risks to growth have increased. 

Globally, trade tensions have intensified,” the BoE said. “As expected, recent UK data have been volatile, in large part due to Brexit-related effects on financial markets and businesses,” it added. The BoE said the UK’s “economic outlook will continue to depend significantly on the nature and timing of EU withdrawal”. Britain is scheduled to leave the bloc on October 31, when it will lose access to major markets covered by EU trade agreements. 

Without a Brexit deal between London and Brussels, the UK will default to “third country” status with the EU, with trade relations run on World Trade Organisation rules. The MPC on Thursday added that the prospect of future UK rate hikes had also lessened because of Brexit. “Increased Brexit uncertainties have put additional downward pressure on UK forward interest rates and led to a decline in the sterling exchange rate,” it said.

British annual inflation has dipped to the Bank of England’s 2.0-percent target rate, official data showed Wednesday. The Consumer Prices Index (CPI) rise over 12 months eased back in May from 2.1pc in April. Official data Thursday meanwhile showed that British retail sales sank last month, painting a downbeat picture of the Brexit-facing economy. Sales by volume sank by 0.5pc from April, when they had dipped by 0.1 percent, the Office for National Statistics said ahead of Thursday’s announcements by the BoE.