Tuesday 23 October 2018

BoE's Mark Carney wants Brexit transition deal as retail wanes

Mark Carney
Mark Carney
Donal O'Donovan

Donal O'Donovan

British retail sales recorded their first year-on-year decline since 2013 last month as consumers struggled with fast-rising prices and stagnant wages.

It's bad news for Irish goods exporters, especially in the food and drink sectors which continue to rely heavily in the UK market.

The latest UK data came as Bank of England governor Mark Carney, pictured, insisted that a transitional arrangement will be needed as the UK exits the European Union.

There was a broad understanding in Britain and in Europe of the importance of reaching a transition deal for Brexit and a good trade and investment deal after that, Mr Carney said yesterday.

"The government recognises, parliamentarians, businesses, people across the country, people in Europe recognise as well that it is in everyone's interest to have at a minimum a transition period to the new relationship," Mr Carney said in an interview with ITV.

He also called for "as comprehensive and open a trading and investment partnership between the UK and the EU 27 at the end of that transition".

That would fit with the Irish Government position, reiterated last night by Foreign Minister Simon Coveney at a dinner for the finance sector in Dublin.

It also echoes views this week from the head of employers' group Ibec. CEO Danny McCoy was one of 13 representatives of the European business groups invited to meet British Prime Minister Theresa May and other top UK officials at Downing Street this week, along with the heads of the UK's CBI, Germany's BDI, and France's Medef.

"I was surprised by the positive and constructive tone, the emphasis on the practicalities that matter to business", Mr McCoy told the Irish Independent after the meeting.

Read more: Dublin could benefit from 'second wave' Brexit influx

Ibec is pushing for minimal trade barriers trade post-Brexit, hoping to maintain as much of the status quo as possible.

Although the fall in UK retail sales reported yesterday was less severe than analysts had expected, the official data showed a 0.3pc year-on-year fall in sales volumes - the biggest since March 2013.

That partly reflected a very strong performance by retailers in October 2016 which distorted the comparison. "We are continuing to see an underlying picture of steady growth in retail sales, although this October suffered in comparison with a very strong October in 2016," ONS statistician Kate Davies said.

Mild weather also put shoppers off buying winter clothes, adding to the weakness in the figures. But volumes were still far lower that they were before the June 2016 vote to leave the European Union hit sterling and drove up inflation.

Looking at the three months to October, which smoothes out monthly volatility in the data, sales growth picked up to 0.9pc from 0.7pc in the three months to September.

This meant sales volumes in the three months to October were just 1.1pc higher than the year before, the weakest growth rate since May 2013.

Sterling rose slightly after the data and British government bond prices edged down as the sales figures came in less weak than suggested by a series of other surveys of retailers.

"This is in stark contrast to the survey data which were pointing to an absolute bloodbath," Alan Clarke, an economist with Scotiabank, said.

"Things are probably as bad as they are going to get, so I'd be hesitant to extrapolate the downward trend too far," he said. (Additional reporting Reuters)

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business