Ten myths from the ‘no-deal’ Project Fear

Myth 1. The UK economy could shrink by eight per cent in a single year under no deal (Project Fear, Bank of England version)
You will have read about this. The Bank of England now sheepishly claims that this was never meant to be a forecast, only a worst-case scenario. Mark Carney surely knew the headlines it would generate. Doubtless he was shocked – shocked! – to see the newspapers treat scenario as a forecast. Whatever.

But in case there is any doubt, the idea that a no-deal Brexit would cause a crash of such proportions is nonsense, pure and simple. An eight per cent reduction in GDP in one year is the sort of outcome that might be expected after a major civil war but certainly not from a shift to trading under standard and well-established World Trade Organisation (WTO) terms. Even the Brexit-hating (but Nobel prize-winning) Paul Krugman raised an eyebrow at the BoE’s most extreme scenarios.