A vote to leave the EU might result in an “extended period of uncertainty” for the UK’s economic outlook, says Bank of England governor Mark Carney, admitting that the vote is the biggest risk to the UK’s financial stability.
Speaking to the House of Lords economic affairs committee yesterday, Carney said threats stemming from the forthcoming referendum are “the most significant near-term domestic risks to financial stability”.
The referendum will take place on 23 June.
Carney said pressures associated with the referendum could reinforce “existing vulnerabilities” in relation to financial stability, including risks coming from the “very high” current account deficit, property markets and market liquidity.
The UK current account deficit widened to a record high of £32.7bn in the fourth quarter of last year, according to the latest figures from the Office for National Statistics.
Carney said he won’t take an official position on potential Brexit, but said it is the bank’s “duty” to report its judgement on the potential risks of an exit from the European Union.
He said the BoE had not made, “and will not make”, any overall assessment of the economics of UK’s membership of the EU.
But he said it will assess the implications where it is necessary for the Bank to meet its objectives of maintaining monetary and financial stability.
He added: “As with the Scottish Referendum, we will communicate as much as is prudent about those plans in advance of any risk materialising and as comprehensively as possible once risks have dissipated.”
Elsewhere in the statement, Carney noted the importance of buy-to-let market as a “big concern” because “”growth in mortgage lending is now being driven solely by the buy-to-let sector.”
In anticipation of planned changes to stamp duty, the number of buy-to-let mortgages increased by 6 per cent in January, Carney says.
Given the new tax changes, Carney says the FPC has decided to take no further action “at this stage” but will continue to monitor any potential threats to financial stability resulting from the buy-to-let market.