City of London would take hit from Brexit, warns Mark Carney

Speaking to the House of Lords economic affairs committee, Mr Carney said that the City of London’s strength would “unlikely be enhanced” by a withdrawal from the European Union. He added that Brexit would make “it less likely that London would retain its position”, reports The Telegraph.

The Governor said that the strength of the British financial centre had been “reinforced by the UK’s membership of the EU and ease of access to the euro area that it is afforded”. However, the Canadian admitted that the City’s strength is “not solely based on that”.

Mr Carney suggested that London would remain a financial centre after a vote for Brexit, but “potentially to a different order of magnitude; in other words smaller”. He said that the City would “retain a position of great importance, but I’m not sure the adjective preeminent would necessarily apply”.

The Governor stressed that the City benefitted from what he described as “the greatest pool of human capital, in my opinion, in financial services”, referring to the substantial skills and experience of those working in the sector. He added: “There are tremendous advantages to that.”

Mr Carney has previously said that a vote to leave the EU could result in the loss of some British banking jobs. He told MPs last month that “certain firms would take a view in terms of relocation” after a vote for Brexit, and that “we would expect some activity to move; there would be a logic to that”.

The Governor also warned on Tuesday that the forthcoming EU referendum may already be hitting the wider British economy. He said that the June 23 vote had “the potential to reinforce existing vulnerabilities in relation to financial stability”.

Mr Carney said that risks were emanating from the UK’s “very high” current account deficit, as well as from property and financial markets. “Some elements of these risks may be beginning to manifest,” he said.

He continued: “A vote to leave the EU might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short run.”

Mr Carney warned that Brexit could result in “less growth” as a result of the UK’s “remarkably high” current account deficit – the size of the gap between money flowing in and out of the economy.

“The likelihood is that it would become more expensive to fund that deficit,” he said, adding that this would mean “that there would be less activity in the economy; less growth”.

The Bank has been accused of becoming too political by advocates for a Brexit. The Canadian central bank chief rebuffed his critics, explaining that it was necessary for the Bank to assess and report “major risks” to the British economy.

“It would be political to suppress important judgements which relate directly to the Bank’s remits and which influence our policy actions,” the Governor continued. Mr Carney said that the type of analysis published by the Treasury on Monday was useful to inform the “direction” of the impact that Brexit would have on the British economy.

The Government’s report found that the economy would be at least 6 per cent smaller by 2030 if Britons voted to leave the EU on June 23, and the UK pursues a trade deal along the lines of that enjoyed by Switzerland, than if it remains a member.

The economic techniques used to produce the report were to his mind “a sound analytic process”, Mr Carney said.

Matthew Elliott, chief executive of Vote Leave, said: ‘We were told the city would be at risk if we didn’t join the euro. Those claims were wrong then and they are wrong now.

“London is the the financial capital of the world because of its global talent pool, its tax and legal system and the dynamic nature of our economy, not because of our EU membership. After we ‘Vote Leave’ all those characteristics will be enhanced as we take back control.”