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Transitional period after Brexit desirable for business, says Carney


Mark Carney said that monetary policy has been the salvation, not the illness, of the UK economy.

Mark Carney said that monetary policy has been the salvation, not the illness, of the UK economy.

Mark Carney said that monetary policy has been the salvation, not the illness, of the UK economy.

Bank of England governor Mark Carney has said that a transitional period after Brexit is "absolutely desirable" for business.

The governor agreed that it would be "advantageous" for firms to have a period of adjustment and time to restructure after a deal is struck with the European Union.

"Of course, on the surface yes, it's absolutely desirable," he told Channel 4 news.

But even without a transitional period, "people will adjust", Mr Carney said.

"It's desirable. It's very much desirable from a European perspective in the financial sector.

"The Government has to weight a whole host of issues for a whole host of industries, and determine its priorities, and only the Government can do that."

He told Channel 4 there has been "a lost decade of growth" for households which has fuelled anxiety across the UK.

"Real incomes in this country have not grown for the last 10 years.

"That is incredible and shines a light on the inequality, inequalities that exist in this economy ... That light also gets shone on the Bank of England, quite responsibly."

But the governor defended monetary policy in a speech at Liverpool John Moores University on Monday.

He credited monetary policy for having helped create 2.5 million jobs, increase wages by 17% and raise real gross domestic product (GDP) by 15%.

Mr Carney also denied claims that monetary policy tools such as the Bank's quantitative easing programme (QE), which sees the central bank print money to buy Government bonds, have disproportionately hurt savers but aided the asset rich.

The Bank has embarked on controversial measures including ultra-low interest rates and quantitative easing since the financial crisis, and cut rates to a record low of 0.25% in August as part of a post-Brexit stimulus package.

Answering questions following his speech, the governor said he would not "pretend to know exactly why people decided to vote" for Brexit, but noted that alongside sovereignty and economic prospects, people seemed to feel they were "losing control".

"(What) most felt was a sense of losing control, taking back control ... and it's felt because of those large forces of trade and this rapid shift in technology", which have added to job insecurities, he said.

"How do you as a country ... how do you equip people at a local level so that they'll be ready for those changes?"

Mr Carney said governmental policies will be key in boosting UK prosperity.

He said: "The Chancellor's recent Autumn Statement begins the process of rebalancing policies.

"While fiscal prudence will continue, the degree of fiscal drag will be reduced somewhat, and major investments in the structural drivers of productivity."

The governor also used the speech to criticise aspects of globalisation and free trade.

He said: "Globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities.

"For free trade to benefit all requires some redistribution.

"We need to move towards more inclusive growth where everyone has a stake in globalisation."

While the picture in the UK is "complex", there are high levels of overall inequality, with "sharper disparities" emerging in recent years, Mr Carney said.

"When combined with low growth of incomes and entrenched intergenerational inequality, it is no wonder that many question their prospects," he said.

On transitional Brexit arrangements, Mr Carney said the negotiations were unlikely to be concluded until the last minute and so businesses in heavily regulated fields would need time to adjust.

In an interview with journalism students at the university, he said: "It's an issue, I think it's best explained, for heavily regulated sectors such as the financial services sector or let's say pharmaceuticals sectors - drug rules and patents and things.

"The question is what happens at the end of those negotiations - some things will change, some will remain the same.

"Are businesses going to be able to take advantage of those changes, adjust to those changes overnight?

"Because the way these negotiations work, everything doesn't come together until the last minute, in fact the last second.

"The expression in trade deals is nothing is agreed until everything is agreed.

"So the idea is that once everything is agreed, business would have a bit of time to restructure, reorient, invest and move forward."