Brexit: Bank of England governor shreds Boris Johnson's claim for avoiding economic damage after no-deal

Mark Carney says law to avoid trade tariffs can only be used if there is an agreement and the central point of a no-deal Brexit is – there is no deal

The Bank of England governor has rubbished a key Boris Johnson claim for avoiding economic damage after a no-deal Brexit, in a severe blow to the Tory leadership favourite.

Mr Johnson dismissed fears about crashing out of the EU by arguing the UK could still enjoy tariff-free trade under what is known as “Gatt 24” until a permanent agreement was struck.

But Mark Carney pointed out the trade law could only be invoked if there was an agreement in place – and the central point of a no-deal Brexit was the absence of a deal.

“The Gatt rules are clear,” he told the BBC. “Gatt 24 applies if you have an [withdrawal] agreement, not if you’ve decided not to have an agreement, or you have been unable to come to an agreement.

“We should be clear that not having an agreement with the European Union would mean that there are tariffs, automatically – because the Europeans have to apply the same rules to us as they apply to everyone else.”

Alistair Burt, a former minister and supporter of Jeremy Hunt, Mr Johnson’s rival, said: “You have got to be on top of the detail – no deal would be very dangerous.”

He pointed out the gaffe came after Mr Johnson had stumbled over his plan for huge tax cuts for high earners when the impact on taxpayers in Scotland was revealed.

To use Article 24 of the General Agreement on Tariffs and Trade (Gatt) – avoiding tariffs on goods – a trade agreement must be agreed in principle, rather than be an aspiration.

Its use also needs the two sides to agree, meaning the UK could not simply impose it on the EU after a crash-out departure.

During Tuesday night’s TV debate, Mr Johnson was challenged by Rory Stewart on the import taxes – and, therefore, border controls – that would be required on agricultural goods crossing to and from the Republic of Ireland.

He replied: “There will be no tariffs, there will be no quotas, because what we want to do is get a standstill in our current arrangements under Gatt 24 – or whatever it happens to be – until such time that we have negotiated an FTA [Free Trade Agreement].”

The answer appeared to betray the former foreign secretary’s lack of detailed knowledge, a persistent criticism of his record in office.

The government has already accepted there would be some tariffs, after a no-deal Brexit, on beef, lamb, pork, poultry and some dairy products, finished vehicles and ceramics.

Carolyn Fairbairn, the head of the Confederation of British Industry employers’ organisation, described the March announcement as “a sledgehammer for our economy”.

Furthermore, even the absence of tariffs would not avoid the need for controls at the Irish border, because physical checks on standards of goods would be required if the UK leaves the EU single market.

In the same interview with the BBC, Mr Carney also said 60 per cent of UK businesses that export to the EU still do not have all the documents they need to continue exporting if Britain crashes out of the bloc.

“[That] means there are 150,000 businesses that don’t yet have some of the paperwork that’s required in order to export,” he said.

He added that firms had built up inventories so they could continue supplying UK customers in the event of no deal, but the stocks would last only “weeks”.

Additional reporting by Olesya Dmitracova