Bank of England refuses to be drawn into Brexit speculation

Bank of England governor Mark Carney batted away questions on Brexit on Tuesday as the pound remained under pressure, hitting new seven-year lows against the dollar.

While admitting continued volatility was likely for sterling as the poll draws closer, the central bank will treat the possibility of Britain exiting from the European Union "exactly like we treat any other political event," Carney told MPs at a Treasury hearing in Westminster.

Contingency planning

Carney made it clear Threadneedle Street was not making a judgment on the likely outcome of the June 23rd referendum, nor on the potential impact if Britain were to leave, although he did admit to some “contingency planning” on the matter.

The Bank of England governor was understandably cautious of wading into the contentious "in-out" issue. Since London mayor Boris Johnson came out against prime minister David Cameron at the weekend by revealing he will support the campaign for Britain to leave, the debate has become ugly.

As sterling was tumbling on the foreign exchanges on Monday, there were angry exchanges. In the Commons, Cameron accused Johnson of using the Europe issue to further his own ambitions to become prime minister.

Carney, meanwhile, has already been embroiled in one Brexit row. Last May, a secret project by the bank to assess the financial risks of Britain leaving the EU was revealed after its press office mistakenly forwarded a confidential internal email about it to the Guardian.

Say nothing

Only a small group of senior bank staff were involved in the research, codenamed “Project Bookend”, and the email revealed they had been advised that, if questioned about the work, whether by journalists or internal bank colleagues, they were to say it had nothing to do with the referendum.

So Carney was keeping quiet on Tuesday, although he is being recalled to Westminster again next month, specifically to answer questions on Brexit. As battle lines were being drawn, others were lining up to give their views, from cabinet ministers and backbencher to business leaders and economists.

The Times newspaper (aided by Number 10) rounded up 200 business leaders to sign a letter urging Britain to remain in Europe. Their names and details took up virtually a whole page, as they warned Brexit would put British economic growth and jobs at risk.

Britain needs “unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs”, the letter said. The country will be “stronger, safer, and better off remaining a member of the European Union”.

The 200 signatories included bosses of just over a third of the companies that make up the FTSE 100 – BT, BAE, Burberry, BP, Royal Dutch Shell, HSBC and Vodafone among others. The boss of Marks & Spencer, Marc Bolland, signed the letter in a personal capacity. But other top firms were conspicuous by their absence, notably the big supermarket groups.

It seems the food retailers are, like Carney, wary of giving their views on such a contentious issue. Sainsbury's insisted it was "an apolitical organisation" and the decision was up to the British public. Tesco said that, whatever the decision, its focus would continue to be on serving its customers.

European ties

Included among the 200 signatories of the letter was Xavier Rolet, chief executive of the London Stock Exchange. He was doing his bit to forge closer European ties on Tuesday as news leaked that the LSE was in merger talks with Germany's Deutsche Borse.

Shares in the LSE surged 14 per cent as the talks were confirmed, valuing the group at over £9 billion. Shares in Deutsche Borse also jumped, valuing it at around £12 billion.

This is not the first time the two have attempted a tie-up: a merger was agreed in 2000, but abandoned when the Swedish OM Gruppen made a rival move. Then, in 2005, the LSE turned down an offer of £1.3 billion from Deutsche.

The timing of their renewed negotiations now, against the background of the increasingly heated Brexit debate, is intriguing to say the least. And the leak of the news may reawaken painful memories of an LSE briefing paper mistakenly faxed to journalists when merger plans were announced 16 years ago.

In the event that talks were aborted, the damage-limitation strategy was to include off-the- record “knocking copy” blaming the Germans for intransigence and for having no shared vision, despite the LSE’s willingness to compromise. Fiona Walsh is business editor of theguardian.com