Brexit vote may spark recession, Mark Carney warns

The Bank of England has given its starkest warning yet that a UK vote to leave the EU could hit the economy.

Mark Carney, the Bank's governor, warned that the risks of leaving "could possibly include a technical recession".

Prime Minister David Cameron said the warning amounted to "a very clear message" of the dangers of Brexit.

Vote Leave campaigners have strongly criticised Mr Carney, with one calling for him to resign.

However, a spokesman for Mr Carney rejected the call, saying the Bank had "a duty" to make its judgements known.

The latest minutes from the Bank's Monetary Policy Committee (MPC) said that a leave vote may cause both growth and sterling to fall and unemployment to rise.

Mr Carney said the Bank had not compiled formal forecasts about the possibility of a recession - defined as two consecutive quarters of negative growth - resulting from a Brexit vote.

Chancellor George Osborne said the UK now had a "clear and unequivocal warning" from the MPC as well as the Governor of the Bank of England about the risks of a Leave vote,

"The Bank is saying that it would face a trade-off between stabilising inflation on one hand and stabilising output and employment on the other," he said.

"So either families would face lower incomes because inflation would be higher, or the economy would be weaker with a hit to jobs and livelihoods. This is a lose-lose situation for Britain. Either way, we'd be poorer."

Jacob Rees Mogg, a Tory MP and Treasury Select Committee member, called on Mr Carney to resign.

"I think it is unprecedented for the governor of a central bank to suggest that people should short his own currency. Suggesting sterling will fall sharply is simply not what responsible central bankers do," he said.

Former Work and Pensions secretary Iain Duncan Smith said that Mr Carney needed to be "very careful" about making such comments.

In response, a spokesman for Mr Carney said: "The Bank of England has not made, and will not make, any overall assessment of the economics of UK's membership of the European Union.

"At the same time, the Bank must assess the implications of the UK's EU membership for our ability to achieve our core objectives and we have a duty to report our evidence-based judgments to Parliament and to the public. That is the fundamental standard of an open and transparent central bank.

"Assessing and reporting major risks does not mean becoming involved in politics; rather it would be political to suppress important judgments which relate directly to the Bank's remits and which influence our policy actions."

The Bank's latest quarterly Inflation Report, released on Thursday, predicted that economic growth would slow in the second quarter of the year, but pick up in the second half. It also cut the growth outlook for the next three years.

The report also forecast that inflation would reach 0.9% in September if long as the UK stayed in the EU.

The MPC unanimously voted to keep interest rates at 0.5%.