Worries over no-deal Brexit

Carney warns of no-deal Brexit shock

Mark Carney, the governor of the Bank of England (BoE), has warned that a no-deal Brexit would result in an instant hit to the economy, saying the value of the pound would fall in response to a “real economic shock”.

He told the BBC’s Today programme that items such as food and petrol would become more expensive, while a “change in trading relationship means that real incomes will be lower.”

He commented: “The economics of no deal are that the rules of the game for exporting to Europe or importing from Europe fundamentally change,” adding that “very big” and “highly profitable” industries in the UK would become “uneconomic”.

Meanwhile, Mr Carney hit back against claims from former Conservative leader Iain Duncan Smith who, in response to the BoE cutting growth forecasts, described Mr Carney as “one of the architects and promoters” of ‘project fear’.

Mr Carney said it was “not helpful” to deny that leaving “the most integrated economic relationship in the world” would have an impact on the economy.

SMEs voice Brexit concerns

Ian Rand, chief executive of Barclays Business Banking, has revealed the concerns he most often hears from small business owners in regard to Brexit.

These include worries about staff levels once the UK exits the EU, the finance options available to SMEs to see them through any turbulence, the impact currency movements will have on costs, and the potential disruption to supply chains

SMEs not ready for no-deal

Many smaller businesses are “desperately under-prepared” for a no-deal Brexit, the Federation of Small Businesses has warned.

Martin McTague, the FSB’s policy and advocacy chairman, has called for clarity over £108m the Treasury has said was set aside to promote and support businesses to ensure they are ready for Brexit, saying: “We urgently need more information about what this money is actually for,” asking: “What kind of support will it fund? How many small businesses will be able to access it? When will they be able to access it?”

Craig Beaumont, director of external affairs at the FSB, has called for resources to help small firms work out what they can do to prepare for a no-deal scenario.

M&A deals decline in H1

Analysis by EY shows that the value of merger and acquisition deals in Europe fell by £15bn to £23.8bn year-on-year in the first half of 2019, with the number of deals down from 251 to 238.

H1 2019 saw UK investors complete 97 deals totalling £6.3bn, marking a decline on the 103 deals – which were worth £13.5bn – completed in H1 2018. EY said global tensions such as Brexit and the trade dispute between China and the US have contributed to the dip in enthusiasm for M&A deals.

The firm’s Tom Groom commented: “While the drop in deals in volume terms is not that significant, in value terms it is.”

Letter: EORI rethink needed

In a letter to the Times, Martin McTague of the Federation of Small Businesses warns that a no-deal Brexit could see thousands of small businesses unable to import from, or export to, the EU.

He highlights concerns that large numbers of businesses will not have the Economic Operator Registration and Identification (EORI) numbers that they require to continue trading within the EU, with only a third of those in need of an EORI number having applied.

He says the solution would be to drop the requirement to apply for an EORI number and automatically issue the numbers to all VAT-registered firms that trade exclusively with the EU.

Brexit bothers business?

Rashmi Dubé in the Yorkshire Post considers the impact Brexit may have, noting ICAEW research which suggests business confidence has declined and a quarter of smaller firms are having difficulties.

She also highlights EY research suggesting that the City will be less accessible to the EU if no Brexit deal is secured, with around 9% of financial services companies moving their business abroad.

IMF expert: PM can spend to boost the economy

However it is not all negative.

Olivier Blanchard, the former chief economist of the International Monetary Fund, believes Boris Johnson will be able to embark on a spending spree to boost the economy after Brexit, saying ultra-low bond yields mean deficits can be widened with little damage to public finances.

He told the Telegraph: “Not only does debt have lower costs, deficits have larger benefits”, adding: “If the economy is not at full employment, and monetary policy has run out of ammunition, then deficits can help maintain demand and maintain low unemployment.”

Considering the UK, Mr Blanchard said there is little need for spending restraints but there is “not much of an argument” for widening the deficit as the economy is close to full employment. He added, however, that if Brexit brings a change and the economy slows down considerably, “fiscal help would be needed.”