Mark Carney will stay on as Bank of England governor until the end of January 2020, providing continuity during Brexit, which Philip Hammond warned might be “turbulent”.
Announcing the extension of the term in Parliament, the UK chancellor on Tuesday made it clear he was worried that the months around Brexit could be difficult for the UK economy.
In an exchange of letters, Mr Carney pledged to work for “a successful Brexit” while Mr Hammond said the move was necessary “to ensure continuity during what could be quite a turbulent period for our economy in the early summer of 2019”.
The chancellor said Mr Carney would “support a smooth exit from the European Union and an effective transition to the next governor”.
Speaking later at a meeting of the House of Lords economic affairs committee, Mr Hammond agreed with Michel Barnier, the EU’s chief negotiator, that a Brexit deal could be hammered out within six to eight weeks. “That’s quite a large timescale,” he said, saying the EU was adept at doing deals at short notice. “It is do-able.”
However, he confirmed that any “deal” in Brussels could leave many details of a future relationship between the EU and the UK to be filled in at a later date. He said a political statement on the future would “in the commercial world be the equivalent of a heads of terms”.
Mr Hammond added that the appointment process of the next governor would take place next autumn, postponing the speculation surrounding the job until well after the scheduled date for Britain’s exit from the EU of March 29 next year.
One of the early tasks for the new governor would be to help set out Britain’s desired relationship with Europe on financial services, which the government hopes will be significantly closer than the EU’s standard relationship with other non-EU countries.
Mr Carney has now extended his term twice from his original intention only to serve five years of his eight-year term. He first lengthened the term shortly after the EU referendum in 2016 until mid-2019.
Mr Carney’s family will stay in London until the second half of 2019 and then return to Canada, with the governor following in early 2020.
In his letter to Mr Hammond, the governor said he had a duty to carry on because “it is important that everyone does everything they can to support a smooth and successful Brexit”.
Pledging to do “whatever I can to promote both a successful Brexit and an effective transition at the Bank of England,” Mr Carney appeared to be trying to quash speculation that his flexible departure was motivated by a lack of alternative international jobs.
“It is a privilege to serve as governor at the bank and I look forward to continuing to work with my exceptional colleagues at the bank as we promote the good of the people of the United Kingdom by maintaining monetary and financial stability,” he wrote.
John McDonnell, shadow chancellor, welcomed Mr Carney’s extended stay at the BoE, saying: “I’m pleased. This should give us a bit of stability.”
Asked if the next governor should be a woman, Mr McDonnell said: “It would be useful — it would be good to get a bit of gender balance in these things.” He declined to say who he favoured for the eventual succession.
The new timetable will enable the Treasury to delay its selection process for a new governor until next autumn. Mr Hammond also announced on Tuesday that the Treasury had reappointed Jon Cunliffe to serve a second term as deputy governor for financial stability at the bank.
Andrew Bailey, chief executive of the Financial Conduct Authority, said it was “critically important that we have appropriate continuity at this time”. He added that he had “a strong working relationship with both Mark and Jon”.
The chancellor also said on Tuesday he was still juggling dates for his autumn Budget to ensure it did not coincide with the final stage of the Brussels Brexit talks, confirming that it was possible there could be a special European Council in November.
One option would be to hold the Budget in October, but Mr Hammond’s allies say no final decision has been taken. Traditionally, the Treasury holds its big autumn fiscal events in late November or early December.
Additional reporting by Caroline Binham in London
Get alerts on Mark Carney when a new story is published