Brexit has already cost every household in Britain £900, according to Bank of England governor Mark Carney.
Speaking at a Treasury Select Committee review of the Bank’s inflation report for May, he explained that the British economy had shrunk by 1% against expectations voiced two years ago, at the time of the referendum.
At the same time, the world economy, including the Eurozone, had expanded faster than forecast.
Carney even suggested to MPs on the committee that the adjusted ‘real’ shrinking of the economy was more like 1.75% or 2%.
“There are Brexit effects that come through,” he told the committee.
Business investment down
“If you map it onto household incomes, real household incomes are about £900 lower than we forecast, which is a lot of money.
“In the short term, over the last year and a half, there has been an impact relative to what we would have expected, even with some pretty good tailwinds on the back of this economy.”
Carney argues that some of this lost income is due to Brexit.
He claims uncertainty over Britain’s future trade relationships had put a brake on business investment, which is down around 4% compared to forecasts.
Brexit had also harmed incomes – which even fell a little last year – as the Pound dropped in value against other major currencies after the Brexit vote.
Financial pain
Although the country’s biggest companies prospered because a lower Pound made their goods and services cheaper overseas, at home, the weak Pound also pushed up inflation, reducing everyone’s spending power in the shops.
Brexit was not the only cause of this slump in the standard of living, said Carney, as ongoing problems of low productivity compared to our global competitors and other economic factors also contributed.
Carney also discussed the official interest rate with the committee. He told the MPS that they should expect to see a ‘gentle rise’ in the rate over the coming years.
Leading Remainers, such as former Tory Chancellor George Osborne and Liberal Democrats leader Vince Cable, seized on Carney’s words as proof that a leave referendum vote would be followed by financial pain for the country.
One MP, Liberal Democrat Tom Brake tweeted that he could not remember any warning that household incomes would drop by £900 on the side of the infamous red bus driven around the country by Brexiteers.