Former Bank of England governor says despite political difficulties there will be many opportunities once UK leaves EU
Britain may be better off going for a hard Brexit that would mean leaving the single market and customs union, Mervyn King, the former governor of the Bank of England, has suggested.
Lord King, who has been more optimistic about leaving the EU than many economic commentators, acknowledged that Brexit would bring great political difficulties and would not be a “bed of roses”.
Speaking to BBC Radio 4’s Today programme, he also said there would be many opportunities economically for the UK striking out on its own.
The crossbench peer, who led the bank for a decade until 2013, said the UK should leave the European single market and warned there were “real question marks” over whether it should seek to remain in the customs union, which would limit its ability to forge trade deals on its own.
Theresa May’s cabinet is split on the issue of the single market and customs union, with the most pro-Brexit ministers seeking a clean break and others warning of the economic dangers of being cut adrift from the UK’s closest trading partners.
King said before the referendum that warnings of economic doom about leaving the EU were overstated. Since then, he has welcomed the fall in the pound and said he believes Britain can be better off out than in the EU.
He told the BBC on Boxing Day: “I think the challenges we face mean it’s not a bed of roses – no one should pretend that – but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take.
“There are many opportunities and I think we should look at it in a much more self-confident way than either side is approaching it at present. Being out of what is a pretty unsuccessful European Union – particularly in the economic sense – gives us opportunities as well as obviously great political difficulties.”
King said it made no sense for the UK to seek to join Norway as a non-EU member of the single market, which would allow free access for businesses but probably mean accepting freedom of movement of EU citizens.
He also raised doubts over the merits of remaining within the customs union, which would allow Britain to trade goods without border tariffs, like Turkey, but restrict its ability to strike its own trade deals.
A Turkey-style arrangement would make it more difficult to take advantage of those opportunities, said King. “I don’t think it makes sense for us to pretend we should remain in the single market and I think there are real question marks about whether it makes sense to remain in the customs union. Clearly, if we do that we cannot make our own trade deals with other countries.”
He said the government should outline its policies on immigration sooner rather than later, arguing that it would be a mistake to make them part of the withdrawal negotiations that will be triggered when the prime minister invokes article 50 next year.
King’s comments were immediately welcomed by Nigel Farage, who said they were “wise words” that Britain could thrive outside the single market.
However, a former member of the Bank’s monetary policy committee said Lord King’s intervention was “political” and should be ignored.
Prof David Blanchflower told LBC radio: “I don’t think Mervyn King is a credible source on this“If you look back, there are three huge mistakes he made. First, he was the governor of the Bank of England who never spotted that Northern Rock was going to fail. He was in charge when the biggest recession in 300 years came. Then RBS failed in September 2008 and he had no idea that was happening.
“In 2010, he advised the government that austerity ought to be really good for growth, and that turned out to be a disaster. I don’t think he is a credible source on any of that and we shouldn’t believe in what he says in terms of his forecasts.”
King’s assessment of Brexit came as it was reported that Wilbur Ross, the billionaire businessman chosen by the US president-elect Donald Trump as his new trade chief, had said earlier this year that Brexit represented a “God-given opportunity” for other countries to take business away from the UK.
The US commerce secretary-designate said Britain was facing a “period of confusion” following the vote to leave the EU and that it was inevitable there would be relocations, according to the Times.
Ross will be responsible for negotiating a free trade deal with the UK and his reported comments will raise concerns the incoming US administration will seek to exploit Britain’s isolation following Brexit.
His remarks were said to have been made to an audience of Cypriot financiers in the days following last June’s referendum vote – before he had been appointed to Trump’s cabinet.
“I recommend that Cyprus should adopt and immediately announce even more liberal financial service policies than it already has so that it can try to take advantage of the inevitable relocations that will occur during the period of confusion,” he is quoted as saying.
Ross is said to have added that the UK’s withdrawal from the EU was a “God-given opportunity” for financial rivals of the City of London, naming Frankfurt and Dublin in particular.
Labour said his comments should be a “salutary warning” that other countries were ready to take advantage of the UK’s vulnerability post-Brexit. But a UK government spokesman sought to play down the reported comments, saying: “We will build a relationship with the new administration based on substance not rumour.”
Blanchflower said Ross’s comments “don’t augur well for the future”, when the UK will need to find new trade deals outside the EU.
He told LBC: “There is great uncertainty coming. Firms have no idea what is coming, and in that circumstance, they are going to hold back on investment and hiring … We have no idea what is coming. It is a considerable worry. My expectation is – and virtually every economist now thinks – that the economy is going to slow pretty fast as the uncertainty rises.”.