The Bank of England has warned lenders to bolster their no-deal Brexit planning in the event of a cliff-edge departure from the European Union at the end of the year.
Governor Andrew Bailey, who in his first few months in the role has already had a pandemic crisis to deal with, has called on financial firms to prepare, with a spokesperson noting that ‘it’s fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face’.
Trade discussions between the UK and EU are ongoing with the Prime Minister shunning the idea of delaying the Brexit process due to coronavirus. The fourth round of talks is due to take place soon regarding the future trading relationship, yet key issues remain and time is ticking for an agreement to be reached in a period when the bandwidth of political bodies are stretched during public health and worsening financial emergencies.
Just last month the BoE warned that the UK economy is heading towards its sharpest recession on record, expecting a shrinking of 14% – dependent on there being no second wave of the virus and avoiding a second lockdown.
Bailey commented at the time: “Not all of the economic activity comes back. There’s quite a sharp recovery. But we’ve also factored that people will be cautious of their own choice.
“They don’t re-engage fully, and so it’s really only until next summer that activity comes back fully.”
However, some are optimistic of a largely ‘V-shaped’ recovery, where the decline was sharp but the return could be faster than a traditional economic slump.
Government schemes aimed at helping support the economy through the health crisis, including business grants, CBILS loans and the furlough scheme supporting jobs as best possible. Yet unemployment is still on course to rise above 9% from what was a record low at the end of last year.