Post-Brexit Body Count: Mark Carney is the Last Man Standing

With the greatest respect to the 19,240 British soldiers who died on 1 July 1916, the carnage that has followed the Brexit vote almost 100 years later has seen an astonishing cull of the country’s leaders.

Prime Minister David Cameron has fallen on his sword, Boris Johnson has abandoned the ambition that fuelled his sudden volte face in favour of the Leave campaign, while Rino (remainer in name only) Jeremy Corbyn is hanging on to the Labour leadership by his finger nails.

Michael Gove is limping toward defeat in the Tory party leadership campaign after knifing Boris in the back, while Nigel Farage is content to step down as Ukip leader and revel in his victory by insulting fellow members of the European Parliament. A revolution, like Saturn, will always devour its own children.

August independent think tanks have been derided by Gove as experts that no one has faith in, while pollsters and bookies are nursing heavy losses (again).

Strange to say but the one person to emerge with honour intact is Mark Carney, the Canadian who has run the Bank of England for the last three years.

During the campaign he sparked the ire of the Leave campaign by warning that a decision to quit the European Union could lead to the UK falling into recession, sterling to decrease in value and businesses to relocate over time.

Conservative MP Jacob Rees-Mogg called on him to resign while fellow Tory and arch Leave campaigner Iain Duncan Smith said that Mr Carney needed to be “very careful” about making such comments.

But as 24 June dawned, sterling slumped by 10%, a roll call of banks started hinting they would relocate staff, and a snapshot survey of the construction industry pointed to a fall to a seven-year low, it became clear his warning had just been an honest prediction.

And while those in Project Fear could be accused of scaremongering, Mr Carney was actually able to do something to try to avert the worst outcomes.

In a calm address that contrasted with the near-tearful speech by Cameron, the buffoonery of Boris, and the cynicism of Gove, Carney was able to state that the Bank judged the risks around the referendum were the most significant, near-term domestic risks to financial stability but that it had put in place extensive contingency plans.

Carney needs continued benevolence from foreign investors as he seeks to steer the UK through stormy waters

The Bank is likely to cut interest rates on 14 July to 0.25% and again on 4 August to zero if necessary with the potential for a further £250bn of quantitative easing to follow.

The granting of operational independence to the Bank of England may be one of Gordon Brown’s longest-lasting achievements. The backbenchers’ calls for a political defenestration of Carney were misplaced.

But his job is not done. With the pound still down against both the euro and the dollar, the higher cost of imports will start to feed through to inflation before long.

Starting with the latest Financial Stability Report due out on 5 July, he and his colleagues and the Bank will have their work cut out to maintain confidence among both domestic players and international investors.

A key concern will be the size of the current account deficit - the gap between the goods and services we export and those we import. At 3.7% of gross domestic product, this is large by international standards.

As Disclaimer has warned, as long as 16 months ago, our ability to fund this shortfall relies of the continuing kindness of strangers to put money into our economy.

Given the decision by all the ratings agencies to lower their assessment of the UK’s ability to repay its debts, this job may have become just a little harder. With his domestic foes sharpening their knives, Carney needs continued benevolence from foreign investors as he seeks to steer the UK through stormy waters for the final two years of his term.

Sadly, it took a Canadian to steady the ship after the Bullingdon Club boys had finished their bun fight. Now that Theresa May and Andrea Leadsom have emerged as leading contenders for the Tory crown from the male-created wreckage, Carney really is the last man standing with his reputation intact.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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