UK POOL

Southampton - 2 July 2019

1. Wide of Mark Carney, Bank of England Governor, at podium

2. SOUNDBITE (English) Mark Carney, Bank of England Governor:  

"But looking through everything, surveys are pointing to effectively no growth in the second quarter in the UK and that suggests to me at least that there's something else going on, and part of that something else could be negative spillovers from this drag from a weaker globe. In my view the underlying growth in the United Kingdom is currently running below its rate of potential and it's increasingly reliant on the resilience of household spending."

3. Wide of Carney

4. SOUNDBITE (English) Mark Carney, Bank of England Governor:  

"The intensification of these global trade tensions have increased the downside risks to both UK and global growth. And just to put some numbers around it, and sort of recap what I was saying with the various calculations, the direct effects of these measures is pretty marginal for the UK, a little less, about 0.1 percent. And that's partly because we will benefit from lost trade between the US and China over time. If all the measures come in place it becomes more significant, about 0.4 percent. And if that Brexit-style confidence effects were to take place between businesses in the US and China, the total impact starts to be material at over 1 percent of UK GDP."

5. Cutaway audience

6. SOUNDBITE (English) Mark Carney, Bank of England Governor:  

"For now both a global trade war and a No Deal Brexit remain possibilities, they're not certainties. And the way we conduct policy today is we have to deal with the impact of the uncertainty around those events and how they influence the behaviour of households and businesses and financial markets."

7. Wide of Carney

8. SOUNDBITE (English) Mark Carney, Bank of England Governor:  

"Most importantly we'll make a detailed assessment of these global factors and their potential implications of that sea change for the UK economy. What I've sought to illustrate is that whether current trade tensions shipwreck the global economy, or prove to be a tempest in a teacup, they will have important influence on the outlook for growth and inflation in the United Kingdom. That's as close to Central Bank humour as you're going to get."

9. Mid of audience

10. SOUNDBITE (English) Mark Carney, Bank of England Governor:  

"But however these external tensions evolve, however Brexit unfolds, we will respond. We will respond to any material change in the outlook, we'll adjust policy in the appropriate direction as required to bring inflation back to target, its 2 percent target, while supporting jobs and activity in this most important transition for the people of the United Kingdom."

11. Wide Carney at podium

12. Conference sign

Bank of England Governor Mark Carney warned on Tuesday that the British economy is barely growing in the wake of mounting Brexit uncertainties and intensified trade tensions.

Carney said in a wide-ranging speech that a "sea change" has taken place in financial markets in recent months largely related to worries over the global economy.

Trade tensions, particularly those involving the US and China, have the potential to "shipwreck the global economy" and that's a fear that's taken root across financial markets.

Though some of those tensions were eased over the weekend when US President Donald Trump and his Chinese counterpart, Xi Jinping, agreed to resume trade negotiations, Carney said it would be wise for investors not to get too carried away.

In the first quarter of the year, the British economy grew by 0.5% from the previous three-month period, though that was largely due to companies bringing forward production to build stocks before the original Brexit date.

Carney, who is set to leave the bank at the end of January after seven years at the helm, said the British economy is having to cope with all these trade tensions at a time of acute uncertainty over the country's departure from the European Union (EU).

Britain was originally set to leave the EU on March 29 but because of the British Parliament's failure to back the deal that Theresa May agreed with the EU, it has been granted an extension until Oct. 31.

Jeremy Hunt and Boris Johnson, who are fighting it out to replace May as leader of the Conservative Party and to become the next prime minister, have indicated that they'd be prepared to back a "no-deal" Brexit on that date if no revised agreement with the EU is struck.

Most economists think such an outcome will lead to a deep recession in Britain as tariffs and other restrictions to trade are imposed.

Carney said markets now think the betting odds for a no-deal Brexit have risen to one-in-three, but that "however Brexit unfolds, we will respond, we will respond to any material change in the outlook."