Shoppers and motorists will face higher prices, and a “substantial number” of firms could find they can no longer compete in the event of a no-deal Brexit, Mark Carney has said.
The Governor of the Bank of England stepped up his warnings despite criticism from Brexiteers, insisting that the challenges posed by a no-deal withdrawal on October 31 should not be played down.
In a response to the optimistic predictions made since Boris Johnson became Prime Minister, Mr Carney said: “It may take a while to get to the sunlit uplands.”
His comments came after a leaked Government document suggested a no-deal Brexit could trigger “consumer panic”, food shortages and an increased security threat within a fortnight.
The slide, prepared for ministers and obtained by Sky News, says the pound could fall in the first month, while Northern Ireland may face law and order challenges.
Marked “official sensitive” and titled “What this could look like on the ground”, it also warns that UK nationals in the European Union could lose access to services and residence rights within the first 24 hours.
The prediction of a further collapse in the value of sterling was echoed by Mr Carney, who said it would lead to increased prices for fuel and food.
The Bank chief said a shift to World Trade Organisation tariffs would also render many firms – “potentially it’s a substantial number” – uneconomic, possibly resulting in closures and job losses.
Mr Carney faced claims from former Tory leader Iain Duncan Smith that he had not moved on from the “Project Fear” tactics of the referendum campaign.
But the outgoing Bank of England boss said the “challenges” posed by a no-deal departure from the European Union should not be played down.
He told BBC Radio 4’s Today programme: “The economics of no-deal are that the rules of the game for trade – exporting to Europe or importing from Europe – fundamentally change.
“There are some very big industries in this country where that which is highly profitable becomes not profitable, becomes uneconomic, and very difficult decisions will need to be taken.
“That has knock-on effects on the economy in the short term.”
Mr Carney said the shock to the economy would be “instantaneous” in a no-deal Brexit.
He told Today: “One would expect prices to go up. It’s reasonable to expect, the markets are absolutely clear on this, that in the event of no-deal the exchange rate would go down for a period of time.
“And the area of the economy where that instantly translates into prices – it’s at the forecourt of the petrol station and in fruit and veg.”
Sky reported that its leaked slide was prepared in the final weeks of Theresa May’s tenure as prime minister.
PA understands that the document was shown to ministers but not signed off by the Government, meaning it was not official policy.
But the worst-case scenarios – broken down into First Day, First Fortnight and First Month categories – also included potential friction at sea between UK and EU fishing vessels.
Within 24 hours, it says cross-border agriculture trade in Northern Ireland “virtually stops” as other trade “slows”.
In the First Fortnight column, it details: “Potential consumer panic and food shortages, even in areas which are not directly affected at the border.”
And it warns of a “possible increased risk of serious organised crime including people smuggling and illegal migration”.
The first month could also see heightened policing resources becoming “unsustainable”, as operational gaps in security “continue to emerge”.
A No 10 spokeswoman said: “We do not comment on leaked documents.”
Hilary Benn, the Labour MP who chairs the Brexit Select Committee, said the leak exposed the Government’s “utterly irresponsible” position.
“You almost have to pinch yourself to remember that this is the Government’s own assessment of the implications of Boris Johnson’s stated No Deal Brexit policy,” he tweeted.