EU withdrawal scenarios and monetary and financial stability

A response to the House of Commons Treasury Committee
Published on 28 November 2018

On June 27 2018, the House of Commons Treasury Committee requested that the Bank of England publish analysis of how leaving the European Union would affect its ability to deliver its objectives for monetary and financial stability. The report published today analyses the economic effects of the Withdrawal Agreement and the Political Declaration regarding the future relationship between the EU and the UK, as well as the consequences of leaving the EU without a Withdrawal Agreement.

Our analysis includes scenarios not forecasts. They illustrate what could happen not necessarily what is most likely to happen. Building such scenarios requires making key assumptions about the form of the new relationship between the UK and EU, the degree of preparedness across firms and critical infrastructure, and how other policies respond.  


Economic impacts have been modelled using established empirical relationships to quantify the impact of these assumptions and are constructed using the Bank’s suite of macroeconomic models to ensure their coherence and plausibility. There is inherent uncertainty in some of the empirical relationships, for example around the speed of the economy’s adjustment, given the lack of precedents of reduced openness. Where possible the relationships used have been cross-checked by econometric models, case studies and intelligence from the Bank’s agents across the UK.

The scenarios are calculated for the policy-relevant timelines of the committees—up to five years. As such, they are not assessments of the relative long-term merits of different trading relationships. The MPC and FPC have reviewed the relevant scenarios, and will use them as inputs in their policy deliberations.

PDFEU withdrawal scenarios and monetary and financial stability