Banking sector warns of 1930s-style crisis after no-deal Brexit: 'Social and economic catastrophe'

'If the prime minister’s deal is voted down, we are in totally uncharted territory'

Tim Wyatt
Monday 14 January 2019 21:49 GMT
Brexit Withdrawal Agreement: How might MPs vote

A no-deal Brexit would be an economic and social “catastrophe”, a senior banking industry leader has warned.

Stephen Jones said leaving the European Union (EU) without an agreement could lead to a 1930s-style economic depression, with widespread job losses, homeowners unable to afford their mortgages, and mass defaults on loans.

“A no-deal Brexit on 29 March, where we crash out of European Union, is a catastrophe,” the head of the UK Finance trade body told Channel 4 News. “It’s a social catastrophe, it’s an economic catastrophe.”

The devastation caused by a disorderly exit would not just hurt the banks’ bottom lines, but hit ordinary people, he warned.

“I don’t wish to be labelled a doom mongerer… but if our economy contracts by 10 per cent that’s 1930s-style contraction," he said. "That is a massive increase in credit card losses, mortgage losses, vehicle loan losses.

“This is about jobs, this is about people not being able to pay their mortgages, not being able to pay back their loans, and that’s really bad news and it’s an outcome we can avoid.”

Mr Jones, who leads the British banking sector's lobby group, added: “I think there is a real risk of No Deal happening by accident… if the prime minister’s deal is voted down, we are in totally uncharted territory.”

Asked if he backed Mrs May’s deal to prevent a no-deal scenario, Mr Jones would only say he backed a “solution that avoids a no-deal Brexit”.

He added: “It’s not a great deal, there’s an awful lot of money being paid for a political declaration, which quite frankly is not worth the paper it is written on.”

The political declaration is the second part of the withdrawal agreement which sketches out how Britain and the EU will build their new future relationship after the UK has formally left the 27 nation bloc.

Unlike the rest of the document – which deals with how Britain disentangles itself from the EU and will pay £39bn in the so-called divorce bill – the political declaration is not legally binding nor does it go into significant detail.

London’s position as the centre of the financial world will end after Brexit, Mr Jones also bemoaned, and the Brexit process had “diminished” the capital’s status in the world.

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“London as the European financial centre appears to most us to be – frankly, quietly – over. We’ll do our best to retain what we can, within the context of what’s negotiated, no deal or a deal, but Frankfurt and Paris will become much more important financial centres in a European context.”

The government has been ramping up preparations for a no-deal Brexit in recent weeks.

A Treasury minister was photographed with a briefing note which warned it could cause “no food” and “no Channel tunnel” after leaving a meeting with officials.

Suppliers have been urged to stockpile food in the event of the prime minister’s Brexit deal being rejected, and some people have also been hoarding food and essential supplies themselves in case Mr Jones’s dire warnings come true.

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