Speaking to the House of Lords economic affairs committee, Mr Carney said that the City of London’s strength would “unlikely be enhanced” by a withdrawal from the European Union. He added that Brexit would make "it less likely that London would retain its position".
The Governor said that the strength of the British financial centre had been “reinforced by the UK’s membership of the EU and ease of access to the euro area that it is afforded”. However, the Canadian admitted that the City’s strength is “not solely based on that”.
Mr Carney suggested that London would remain a financial centre after a vote for Brexit, but “potentially to a different order of magnitude; in other words smaller”. He said that the City would “retain a position of great importance, but I’m not sure the adjective preeminent would necessarily apply”.
The Governor stressed that the City benefitted from what he described as “the greatest pool of human capital, in my opinion, in financial services”, referring to the substantial skills and experience of those working in the sector. He added: “There are tremendous advantages to that.” [...]
The Governor also warned on Tuesday that the forthcoming EU referendum may already be hitting the wider British economy. He said that the June 23 vote had “the potential to reinforce existing vulnerabilities in relation to financial stability”.
Mr Carney said that risks were emanating from the UK’s “very high” current account deficit, as well as from property and financial markets. “Some elements of these risks may be beginning to manifest,” he said.
He continued: “A vote to leave the EU might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short run.”
Mr Carney warned that Brexit could result in “less growth” as a result of the UK’s “remarkably high” current account deficit - the size of the gap between money flowing in and out of the economy.
“The likelihood is that it would become more expensive to fund that deficit,” he said, adding that this would mean “that there would be less activity in the economy; less growth”. [...]
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