Mark Carney has dismissed claims that there can be a standstill trading arrangement after a no-deal Brexit.
Tory leadership front-runner Boris Johnson has claimed the UK can stay at a standstill under a no-deal Brexit, citing the General Agreement on Tariffs and Trade (Gatt) 24 of the World Trade Organisation (WTO) treaty.
But Bank of England governor Mr Carney strongly disagreed that this was the case and said both WTO director-general Roberto Azevedo and International Trade Secretary Liam Fox accepted it would be against the rules.
He told BBC Radio 4’s Today programme: “The Gatt rules are clear – the International Trade Secretary Liam Fox has testified to this effect in Parliament and I have spoken to the director-general of the World Trade Organisation on this fact.
“Gatt applies if you have an agreement, not if you have decided not to have an agreement or have been unable to come to an agreement.”
Mr Carney said if the EU was to decide not to apply tariffs to the UK, they would have to also lower tariffs for the US, Canada and the rest of the world.
He said: “We should be clear that not having an agreement with the EU means there are tariffs automatically because the EU have to apply the same rules to us as they apply to everyone else.
“We should be clear that no deal means no deal – it means there is a substantial change in the trading relationship with the EU.
“That may be the choice that the country takes but it should be a choice that is taken with absolute clarity in terms of what that means.”
Mr Carney went on to highlight that 150,000 businesses are “not fully ready” for a no-deal Brexit because their paperwork is not in order.
Only 40% of businesses would be able to continue to export to the EU under no-deal, he said, although this had risen from 20% six months ago.
The Governor also said businesses have been stockpiling but warned there would only be “weeks” of emergency stocks in a no-deal scenario and business would be “reliant” on Government to keep ports open.
He said: “They have done that and those stocks are sitting there and it provides a very short-term level of preparation … well, weeks really.”