Brexit Bulletin: Continuity Carney

(Bloomberg) -- Today in Brexit: A key player says he’s willing to stay in the game a little longer, while the prime minister and the Brexit secretary gear up for questions from lawmakers.

Mark Carney, variously dubbed both the only “adult in the room” and the “high priest of project fear” for his actions since the June 2016 separation referendum, may remain involved in Brexit for a little longer than expected.

The Bank of England governor yesterday opened the door to extending his tenure at the central bank beyond June 2019 to help the U.K.’s transition out of the European Union, telling lawmakers in Parliament that he was “willing to do whatever else” he could to aid the process.

Speculation about Carney’s future ramped up last week after reports that he had been approached to extend his tenure to provide further continuity during Brexit. The BOE governor was seen as a key source of stability in the political power vacuum that followed the vote, particularly for his pledge to support the financial system in its immediate aftermath. He had already also opted to extend his initial term by a year to help steer the BOE through the negotiations.

Now, with the March 2019 deadline looming and the U.K.’s future relationship with the bloc remaining unclear, the Canadian once again may be about to help boost stability. That could come at a good time for the government, as, following the summer recess, warnings about the Brexit process appear to be increasing.

In the past 24 hours alone, BOE Chief Economist Andy Haldane said that markets see about a one in four chance of no exit deal , while Carney’s predecessor, Mervyn King, called the government’s Brexit preparations “incompetent.”

Meanwhile, German Chancellor Angela Merkel said in Frankfurt that she can’t rule out the prospect of failed talks on the U.K.’s exit. And, according to the Telegraph, chief EU Brexit negotiator Michel Barnier made it clear to lawmakers on the Brexit select committee in Brussels that the government’s current framework plan is “not acceptable.”

Keep the Money?

In parliament, Brexit Secretary Dominic Raab suggested that even if the U.K. leaves without a deal, it will still have to pay some money to the bloc. Asked “if we leave the EU with no deal, do we get to keep our 39 billion pounds,” Raab chose his words carefully in reference to the agreed cost of the divorce. “It couldn't be guaranteed that we would provide either the same amount of money or in the same way,” he said. 

While Carney confirmed Tuesday that he’s discussed his term with Chancellor of the Exchequer Philip Hammond, he said he didn’t want to pre-empt a government statement, leaving the ball firmly in Hammond’s court. 

A Treasury official said that an announcement on Carney’s future will be made in “due course,” while a spokesman for Prime Minister Theresa May said there would be news on the governor’s future shortly and said he is “doing a very good job.” The Financial Times later reported that May has endorsed a plan for Carney to stay on until 2020.

Any extension is likely to prove controversial. Carney's actions since the referendum, which included the bank’s interest-rate cut and an extension of the BOE’s quantitative easing, have not been universally popular, with pro-Brexit lawmakers criticizing him for wading too far into the political debate.

 “I fully recognize that during this critical period, it’s important that everyone does everything they can to help with the transition of exiting the European Union,” Carney said yesterday. “I certainly can’t make announcements on behalf of the government but I’ll do whatever I can to support this process.”

Today’s Must-Reads

  • Dara Doyle and Ian Wishart report that European Union officials are exploring how to unlock a wider Brexit deal by making the so-called Irish border backstop more palatable to the U.K., according to a person familiar with the deliberations.
  • British voters are more skeptical about Brexit than they’ve ever been and would probably vote against leaving the European Union if the government called a second referendum, according to new research led by John Curtice, one of Britain’s most respected political analysts.
  • The retailer of Muji products is considering moving its European headquarters out of the U.K. because of Brexit, in what would be at least the second such shift by a Japanese company, Bloomberg’s Suzi Ring and Lisa Du reported Tuesday.

Brexit in Brief

Posen Pessimism | Brexit “is going to be bad no matter what,” and people are underestimating how much of a negative supply shock is posed by even a negotiated exit that retains some EU ties, Peterson Institute for International Economics President Adam Posen said on Bloomberg Television Tuesday.

Counter Attacking | The prime minister’s office has compiled a dossier to rebut former foreign secretary and Brexit proponent Boris Johnson’s claims about May’s Brexit plan, The Times reported, citing a leaked copy of the document. Meanwhile, City A.M. says that former Brexit Secretary David Davis is set to endorse detailed proposals for a Canada-like Brexit trade agreement.

Far-Reaching Costs | European companies aren’t alone in feeling the Brexit pain. Pfizer Inc., the U.S.-based drug behemoth, says its costs for dealing with the upcoming split will reach $100 million.

Helping Hand | Germany plans to offer bureaucratic leeway to Britons who want to become German citizens, waiving the requirement for those who apply for a passport during the transition period to give up their British nationality.

Dismissed Demand | The EU won’t rush to enhance market access for financial firms outside the bloc, a senior German official said, pushing back against key U.K. government demands in the Brexit negotiations.

Football Fears | The Premier League is calling on the government to scrap all restrictions on signing foreign players because of concerns Brexit will harm competitiveness, according to the Telegraph.

Coming Up | Parliament continues to get back into the swing of things following the recess, with May set for her first post-summer Prime Minister’s Questions, while Raab and Oliver Robbins, May’s Europe adviser, appear before a panel of lawmakers.

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