The Bank of England’s preparations for a potential Brexit
The Bank of England’s deputy governor, Andrew Bailey, has told a Treasury committee that the Bank’s first priority following a potential Brexit vote would be to keep financial markets stable and manage the impact on the British economy.
Speaking at the committee meeting, Mr Bailey said the Bank would concentrate on “contingency planning around financial markets and broader macroeconomic fallout from the decision.”
Duncan Montgomery, tax partner at UK200Group member firm Whittingham Riddell, said:
“Before the risk of Brexit comes the referendum hiatus. We are expecting major spending and commitment decisions to be put on hold, for at least a quarter while the vote unfolds. On a Brexit that is likely to continue for another six months or more while the details are worked out.
“Business supplying capital goods, infrastructure and items that are serious commitments from their customers need to be prepared for that slowdown and must be ready to respond appropriately. Looking for exports timed to coincide with that period is a sensible move. Forecasting a 30% cut in orders or more for that period to stress test the business model is also a sensible starting place.
“This may not be an easy ride for many.”
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“The Bank of England talk about managing the market impact of Brexit, but it does not say that it is necessarily a negative impact.
“It does highlight that there needs to be considerably more flesh on the bones of the proposed ‘deal’ to understand the extent of the relaxation of EU controls over London’s financial markets, whilst also highlighting the Norway arrangement, which many politicians seem to see as the alternative, as being an arrangement with all the disadvantages of full membership without the advantages.
“This statement from the Bank of England comes hard on the heels of the Civitas report, which says that past membership has actually held Britain back.”