The governor of the Bank of England, Mark Carney, was described Friday as the “high priest of project fear” after he warned the prospect of a future trading deal between Britain and the European Union was uncomfortably high.
Carney’s warning sent the value of the pound sterling falling, but it also provoked a war of words from a number of leading Conservative politicians.
The pound sterling dropped 0.3 percent against the dollar, to an 11-day low of 1.2975 U.S. dollars.
Carney said in an interview the prospect of Britain leaving the EU without a deal was a relatively unlikely possibility, but it is a possibility, adding that a no-deal Brexit would also be highly undesirable.
Conservative politician Jacob Rees-Mogg, who heads the pro-Brexit European Research Group of Conservative MPs responded to Carney’s warning saying: “Mark Carney has long been the high priest of Project Fear, whose reputation for inaccurate and politically motivated forecasting has damaged the reputation of the Bank of England.”
Former Conservative leader Iain Duncan Smith, another leading Brexit politician, said there would not be a no-deal scenario as Britain and the EU would operate under World Trade Organisation (WTO) rules if the two sides failed to sign a post-Brexit trade deal.
The Brexit fall-out came just hours before British Prime Minister Theresa May interrupted her walking holiday in the Italian lakes region to hold a Friday night meeting with French President Emmanuel Macron at his holiday retreat in the South of France.
Media reports in London said May intended to try to win support from Macron for the soft-Brexit blueprint she published following her now famous cabinet meeting at her own country retreat at Chequers.
May’s own blueprint provoked a string of resignations from her own government team, including former Foreign Secretary Boris Johnson and her Brexit Secretary David Davis.
In a radio interview on the BBC Carney said a no-deal would mean a disruption to trade, and as a consequence, a disruption to the level of economic activity, as well as higher prices for a period of time.
Carney added that the financial system will be ready for that undesirable and still unlikely possibility of a no-deal Brexit.
He called on Theresa May and EU leaders to do all things to avoid it, adding it was absolutely in the interest of both the EU and Britain to have a transition period.
Newly appointed Foreign Secretary Jeremy Hunt, who succeeded Boris Johnson, warned earlier this week that a no-deal Brexit could happen accidentally if Brussels continued to reject Theresa May’s proposals.
Britain is scheduled to end its membership of the bloc next March, with crucial talks plan for this fall to resolve issues over a future relationship, including the fate of the border between Northern Ireland and the Irish republic which will remain as a member of the EU.