The Bank of England cautioned Wednesday that risks to financial stability in Britain remain elevated and that a messy exit from the European Union could have damaging implications for the banking system and the broader economy.
In its quarterly Financial Stability Report, published Wednesday in London, the BoE noted the "likelihood that some U.K.-specific risks to financial stability could materialize" and added that while the economy has held up well so far in the face of the shock of the Brexit vote in late June, "the economic outlook remains weaker for the first half of ."
The slump in the pound since the June 23 vote to leave the EU shows that some international investors expect Britain to be less open to trade and grow slower, because of the Brexit vote, BOE Governor Mark Carney told reporters in a press conference that followed the release.
Carney said British companies need more clarity on Brexit negotiations and the form it will take, adding that it would be "preferable that firms know as much as possible about the desired endpoint, and as early as possible about the potential path about that endpoint."
It will take time to figure out the new relationship with the European Union, Carney said, "A degree of clarity when appropriate will help promise a smooth and orderly Brexit process."
"Firms are making contingency plans for all outcomes," he said. "The timing of the plans and the point at which firms will need to put it in action is some way off."
Prime Minister Theresa May has said that she aims to trigger the exit clause by the end of March, aiming to exit the EU by 2019.
The U.K. faced threats from aboard, especially China where growth is increasingly reliant on borrowing, Carney said. He warned that capital outflows from China could accelerate if the U.S. raises interest rates.