A lower currency will raise the price of imported goods, which was clearly evidenced in the aftermath of the Brexit vote in June 2016. Britain imports around half of its food.
Deputy Governor Ben Broadbent noted upside risks from the imposition of tariffs on many products as well as increased costs at the border on border checks.
A so-called hard Brexit would see trade between Britain and the EU governed by the rules of the World Trade Organization, a development that would require tariffs to be slapped on many products, including many food imports.
Bank of England Governor Mark Carney says some of the criticism thrown at him over the past few days since the bank published its economic assessments of Brexit has been unfair.
Addressing lawmakers, Carney said the analysis, which illustrated potential “scenarios” for the British economy in the wake of differing types of Brexit, was a serious piece of work by the bank that involved 20 senior economists over a couple of years.
Carney dismissed suggestions that it was hurried. There was, he said, “no exam crisis. We didn’t just stay up all night and write a letter to the Treasury Committee.”
In the bleakest scenario — the bank’s assessments were not forecasts — the British economy would shrink by around 8 percent in the months after March 29, the date Britain is set to leave the EU.
The warning triggered many Brexit supporters to argue that the bank had become politicized.
The pound has spiked higher after a top official at the European Union’s highest court advised that Britain can unilaterally change its mind about leaving the EU.
The advice of the advocate general, which is often but not always followed by the full court, triggered a rebound in the pound as investors priced in a higher possibility of Britain not leaving the European Union as scheduled on March 29.
The pound was up 0.7 percent at $1.2811 following the news.
The British Parliament is due on Tuesday to begin discussing Prime Minister Theresa May’s Brexit deal with the EU. All indications are that she will lose the vote next week, which would raise renewed questions about Britain’s departure from the EU.
One option being talked about is a unilateral revocation by Britain of the Article 50 process that governs the Brexit process.
A top official at the European Union’s highest court is advising that Britain can unilaterally change its mind about leaving the EU.
Advocate General Manuel Campos Sanchez-Bordona has told the European Court of Justice that a decision by the British government to change its mind about invoking Article 50 would be legally valid. The advice of the advocate general is often, but not always, followed by the full court.
The court is assessing the issue under an accelerated procedure, since Britain is due to leave the bloc on March 29. The final verdict is expected within weeks.
Since Article 50 of the EU treaty of Lisbon dealing with departing members is scant on details — largely because the idea of any country leaving the bloc was considered unlikely — a group of Scottish legislators wants to know whether the U.K. can pull out of the withdrawal procedure on its own.
The case comes as pressure builds from Brexit opponents for a second referendum on the decision to leave the bloc.
British Prime Minister Theresa May is putting the fate of her Brexit deal in Parliament’s hands, saying lawmakers must back it to deliver on voters’ 2016 decision to leave the European Union and “create a new role for our country in the world.”
May is due to address Parliament Tuesday, opening five days of debate before a Dec. 11 vote on the divorce agreement.
Defeat would leave the U.K. facing a chaotic “no-deal” Brexit on March 29 and could topple the prime minister, her government, or both.
Before the debate, May’s government faces another showdown with lawmakers over legal advice about the Brexit deal. Lawmakers are voting on a motion finding the government in contempt of Parliament for refusing to publish the full guidance from Attorney General Geoffrey Cox.