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Inflation: How Brexit is adding to cost-of-living crisis in UK –Mark Carney, ex-BoE Chief

British Prime Minister Rishi Sunak

*Mark Carney, an ex-Governor of the Bank of England, says Brexit  has added to the United Kingdom’s economic woes by lowering the value of the Pound and contributing to price increases for consumers, urges action to get UK’s productivity ‘back up’

Isola Moses |  ConsumerConnect

As the Bank of England (BoE) in the United Kingdom (UK), warns the country faces record two-year recession, Mr. Mark Carney, an ex-Governor of the Bank, has related how Brexit has added to the UK’s economic woes by lowering the value of the Pound and contributing to price rises.

Carney told the BBC Radio 4’s Today programme, that the fall in the Pound and shrinking economy after the UK left the European Union (EU) had added to “inflationary pressure”.

No. 10 says soaring prices are being driven by COVID-19 and the Ukraine war, according to report.

It is also recalled the Bank, Thursday, November 3, 2022 warned the UK was facing its longest recession since records began.

However, in an attempt to cool rising prices the BoE raised interest rates from 2.25% to 3%, regarded as the biggest jump since 1989.

A recession is defined as when a country’s economy shrinks for two three-month periods – or quarters – in a row.

Also, inflation – the rate at which prices rise – is at the highest level for 40 years in the country.

The invasion of Ukraine has driven up the price of food and energy, as supplies are disrupted by the war and the West tries to phase out Russian oil and gas.

However, Mr. Carney, who was Governor of the Bank of England between 2013 and 2020, said Brexit was also helping to fuel inflation and had “slowed the pace at which the economy can grow”.

He also noted the British Pound had fallen “sharply” against other currencies after the Brexit referendum in 2016 and “hasn’t recovered”.

The former BoE Governor further said: “If I can actually cast your mind back to a few years ago, this is what we said was going to happen, which is that the exchange rate would go down, it would stay down, that would add to inflationary pressure.

“The economy’s capacity would go down for a period of time because of Brexit, that would add to inflationary pressure, and we would have a situation – which is the situation we have today – where the Bank of England has to raise interest rates despite the fact that the economy is going into recession.”

Carney as well submitted that the UK had experienced “a big hit to our productivity” and “we have to take some tough decisions in order to get it back up”.

But Downing Street blamed the impact of the COVID-19 pandemic and the war in Ukraine for the problems in the UK economy.

The Prime Minister Rishi Sunak’s official Spokesman said: “What we are seeing is challenges caused by the pandemic and by war in Europe which have been driving factors in terms of inflation, and we’re seeing high inflation in a number of countries around the world.”

Asked if he was denying Brexit had caused financial issues, he said: “Our focus is on ensuring we have stability and fiscal credibility.

That’s what the Chancellor and the Prime Minister are focused on rather than on a decision taken a number of years ago where people made a clear decision.”

A fall in the value of the Pound makes goods and services which are imported from overseas more expensive, while making exports more competitive.

In September 2022, the Pound fell to a record low against the US Dollar, after then-Chancellor Kwasi Kwarteng announced sweeping tax cuts without saying how they would be paid for.

Report indicates it has since recovered to the level it was at before the so-called mini-budget, after new Chancellor Jeremy Hunt reversed almost all the planned tax cuts.

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