Mansion House speech
Image: © Stefan Rousseau/PA Wire/PA Images

The Bank of England just said Brexit will make Brits poorer

The road to Brexit will not be smooth, and there probably won’t be any cake

Mark Carney, the Bank of England boss, just gave a speech saying that Brexit has made Brits poorer, and will keep making Brits poorer. Cheers Mark. (What happened to the whole ‘if you don’t have anything nice to say…’ thing?!)

His speech was all about interest rates (and cake, but more on that later). As governor of the Bank of England, one of his main jobs is to set the interest rate, the amount of money that the Bank of England charges other banks to lend them money. If they think people need to be spending more, they set the rate low so that banks have an incentive to borrow money and lend it to the public. If they think people should be spending less, they set it high so that banks don't lend too much.

Every now and then Mark Carney is asked whether he's going to raise the rates, and his speech said he won't. The logic is: businesses aren’t spending enough money because they’re not sure what’s going to happen next. That means people’s wages aren’t going up much at the moment (because businesses don’t want to spend more on their employees), which means people aren’t spending much money either. So there's really no reason to raise rates, because banks aren't borrowing much anyway.

In other words, Brexit is making people poorer.


He's pretty sure that this uncertainty from Brexit means people's wages are unlikely to grow as fast as we would hope. Businesses don't know what the deal is going to be with other EU countries, which means they don't know whether they're going to be able to sell much overseas, which means they're unlikely to make any big investments or give any big raises until they know how much profit they're making. The Bank of England can't do much to change that, he says.

Mark Carney's talk on Brexit has never been very positive, something that lots of pro-Brexit people got pretty annoyed about. And it’s worth saying he’s not always been right. The Bank of England predicted that Brits would be instantly poorer after the vote, and had to admit that wasn’t quite true after.

"A land of cake and consumption"... what?!

And in line with the bitchiness that's defined most of the Brexit back and forth so far, Carney’s speech also took a swipe at Boris Johnson, one of UK politics’ biggest Brexit backers.

While he was campaigning for Brexit, Johnson pretty famously said that he was certain the UK would be able to “have its cake and eat it too” – i.e. leave the EU and still have a good deal with it on trade.

Carney? Not so sure. So in the manner of all very serious economics speeches he also reverted to a good slice of sarcasm – "Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption."

(Boris, in case you're reading this: he clearly doesn’t think it’s going to be a smooth path, he doesn’t think there’ll be cake, and he doesn’t think we’ll be eating any of it.)

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