Carney sees Brexit 'acid test' as no-deal shock looms

Brexit is the “acid test” that could show whether the world is heading towards a new era of protectionism, the Bank of England governor has said.

In a speech in London, Mark Carney warned of the growing risks facing the world economy amid a potential trade war between the US and China and the rise of anti-globalisation politics around the world.

He said the market-calculated chances of a recession in the US had increased considerably in recent months and warned of the potential damage that could be wreaked by a Chinese economic crash.

But he said that if the UK reached a deal on Brexit which was open rather than protectionist, it could push the world in a more positive economic direction.

“In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability,” he said.

“Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities.”

However the governor also warned that investment had fallen below its normal levels in the wake of the EU referendum and that the UK economy was operating below par in the face of Brexit uncertainty.

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It comes a week after the governor predicted that this year the economy will grow at the slowest rate since the financial crisis a decade ago.

Asked about the prospect of a no-deal Brexit, he added: “You have to recognise that this could go quite badly.

“We have 45 days left.

“We shouldn’t be under any illusions: a no-deal no-transition Brexit would be an economic shock to the economy.

“It would send a signal globally about the prospects of globalisation.”

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