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The long-term uncerainty over Brexit will likely force the Bank of England to lower interest rates. If accepted, firms may be "better off relocating," say British economic expert.
The Bank of England may need to cut interest rates as high levels of uncertainty loom over a possible Brexit at the end of next month, policymaker Michael Saunders said on Friday in the first clear signal that the Bank is considering lowering the borrowing percentage.
Last week, without directly raising the prospect of cutting interest rates, the Bank said Brexit and slower world growth were increasingly causing Britain's economy to perform below potential.
Saunders said it that the unpredictable path of Brexit would effectively act as a "slow puncture" for the economy.
"Growth has slowed to a mere crawl," he told local businesses in Barnsley, northern England. "I think it is quite plausible that the next move in Bank Rate would be down rather than up."
After a long week filled with critiques towards newly elected Prime Minister Boris Johnson, the Conservative have a 37 percent approval rating while Jeremy Corbyn's alignment increased to 25 percent after a 5 percent increase up from last week.
Regarding Brexit, Johnson’s biggest promises since he took power in July, 43 percent of the voters believe it hasn’t been well handled by the Tory leader.
Saunders was clear that a no-deal Brexit, something Johnson seems determined to carry out, is not a good solution. Bank of England Governor Mark Carney estimated that a chaotic no-deal Brexit could reduce the size of the economy by 5.5 percent.
"This would probably immediately leave some firms unprofitable. Others might face longer-term questions about their viability, or whether they would be better off relocating," commented Saunders to Reuters.