The head of the Bank of England described Britain’s potential exit from the European Union as the single biggest domestic risk to the nation’s economy — even as he insisted the bank would remain neutral in the debate.
In testy exchanges with members of a House of Commons committee, Governor Mark Carney tried to dodge every effort to pin him to a position that either the “in” or “out” campaigners might use ahead of a June 23 referendum on EU membership.
Carney’s testimony was important in a debate where economic data is bantered about with abandon and facts are often in dispute. Carney refused to make a recommendation, but it was clear from his testimony that the vote was fraught with risk.
“The issue is the biggest domestic risk to financial stability because, in part, of the issues around uncertainty,” Carney said. The debate over continued EU membership also has the potential to “amplify risks” surrounding trade and investment, housing and financial markets, he said.
However, he said international risks, such as recent volatility in China, were a greater problem for Britain’s economy.
Carney said that “without question” Britain’s financial center would lose business if the nation decides to leave the EU but fails to negotiate mutual recognition agreements to replace the current “passport system,” which allows financial professionals to work freely throughout the 28-nation EU. He also said he was aware that some financial firms were making contingency plans to relocate should Britain vote to leave the EU.