UK economy hit by 'Brexit effect', Carney warns

Mark Carney

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Uncertainty over the form Brexit will take is continuing to hit UK economic growth, the governor of the Bank of England has warned.

While global growth has accelerated, the UK is suffering a “Brexit effect” in the short term, Mark Carney said.

“The economy is doing not as well as we expected it to prior to the referendum,” he told the BBC in Davos.

That meant the UK economy is now 1% smaller than the Bank had predicted before the EU vote.

“What it works out to is tens of billions of pounds lower economic activity,” Mr Carney said. “Investment has picked up a bit but it hasn’t picked up anyways to the same extent as internationally.”

However, Mr Carney said that as “greater clarity” about the shape of Brexit emerged this year, there would be a “conscious re-coupling” of the UK economy with the global economy.

“The deeper the relationship with Europe, the deeper the relationship with the rest of the world… the better it’s going to be over time for the UK economy,” he added.

The governor’s comments follow a claim by UK chancellor Philip Hammond that the UK and EU economies will only move “very modestly” apart after Brexit.

Mr Hammond said they were already “completely interconnected and aligned”.

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