Bank of England (BoE) governor Mark Carney believes around three in four UK businesses have done as much as they are able to prepare for a no-deal Brexit scenario.
“But it doesn't mean they are fully ready, in fact far from it,” he warned in a BBC radio interview.
The BoE governor also estimates that around 150,000 businesses still lack the paperwork necessary for continuing to export to the European Union (EU) should a no-deal Brexit become a reality, and that although many companies have built up their inventories, stocks were likely to be exhausted within weeks.
“Business will be reliant on what the governments are able to do in order to keep the ports open, the trade flowing,” he commented, adding that the UK’s financial system was rather better prepared for a no-deal scenario.
Tariffs to return
Mr Carney emphasised that if the UK leaves the EU on October 31 with a deal still not agreed, the re-imposition of trade tariffs on goods shipped to the EU would be “automatic”.
His assertion contradicts a claim from Boris Johnson, currently expected to succeed Theresa May as prime minister that the UK could secure a 10-year standstill in current arrangements using an article of the EU’s General Agreement on Tariffs and Trade, aka Gatt 24.
“The Gatt rules are clear... they apply if you have a [withdrawal] agreement, not if you've decided not to have an agreement, or you have been unable to come to an agreement,” Mr Carney said.
“So we should be clear that not having an agreement with the EU would mean that there are tariffs, automatically, because the Europeans have to apply the same rules to us as they apply to everyone else.”
The BoE governor said that he was open to Facebook’s plan to launch its own cryptocurrency, Libra, in Q1 2020,which he would approach "with an open mind but not an open door". Nonetheless, central banks around the world would be setting “ground rules upfront” to protect consumers and their data. Libra “had to be safe or it is not going to happen”.
“Welcome to the world of finance: there is oversight, there is consumer protection, there is market integrity, people have certain rights to privacy that have to be respected, he added.
“And we're not going to allow a network that comes into place that is a network for criminals and terrorists.”
Facebook has issued assurances that Libra will be independently managed, backed by real assets and pegged to a basket of well-known currencies. These have not dispelled concerns over how people’s data and cash will be protected, as well as the currency's potential volatility.
Mr Carney said: “All the major global central banks and supervisors would have direct regulatory control of this if it is going to work, which is an open question, and we have an open mind about it.”
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You might need the HSBC interactive PDF which summarises the key dates, top considerations and five steps for Brexit readiness