On 3 September 2019, the House of Commons’ Treasury Committee published a letter that it had received from Mark Carney, Governor of the Bank of England (BoE). The letter was in response to an earlier Treasury Committee letter concerning the scenarios that were published by the BoE in November 2018 regarding how different Brexit outcomes would affect the BoE’s ability to meet its monetary and financial stability objectives.

In its letter the BoE reminds the Treasury Committee that the analysis published last November contained a number of scenarios requested by the Treasury Committee. Importantly, these scenarios were not forecasts – they illustrated what could happen under a range of key assumptions; they did not necessarily represent what would be most likely to happen.

In summary, the letter reports that advancements in preparations for a no deal Brexit since November have meant that the BoE’s assessment of a worst case no deal scenario has become less severe. However, the BoE’s assessment of scenarios where there is a withdrawal agreement followed by a transition to World Trade Organisation trading relationship or by a transition to a new Economic Partnership remain unchanged. The letter expands on the detail underlying the updated no deal Brexit assessment. In this updated assessment, there is an initial peak-to-trough decline in UK GDP of 5.5% in absolute terms, a rise in unemployment to 7% and inflation peaks at 5.25%.