Government attacked over Brexit 'fantasy'

Prime minister Theresa May Photo: PA / Peter Byrne - Credit: PA Wire/PA Images

A senior European Union official has brutally branded the UK’s approach to Brexit as a ‘fantasy’.

The official insisted Britain must accept the ‘consequences’ of its decision to quit the bloc and abandon the ‘fantasy’ that things would remain the same.

The increase in tension emerged after the UK made clear it would seek a return of £1 billion in funding it has put into the Galileo satellite system if the EU continued to shut Britain out of key aspects of the project post-Brexit.

The spat also came as Bank of England governor Mark Carney said a ‘disorderly’ Brexit transition period may trigger a cut in interest rates, or force a pumping of money into the economy, in order to stabilise the situation.

The UK central bank’s current projections are based on a smooth transition when Britain leaves the European Union, he said in a speech on Thursday, before warning that ‘a sharper Brexit could put monetary policy on a different path’.

Addressing the Society of Professional Economists, he said that if that happened, the Bank’s Monetary Policy Committee (MPC) would face ‘a trade-off between the speed with which it returns inflation to target and the support policy provides to jobs and activity’.

Earlier this week, Carney said Brexit has knocked real household incomes by around £900, and lowered growth by ‘up to 2%’ against what the Bank of England had expected in 2016 if the UK had voted to remain in the EU.

But Downing Street hit back with Theresa May’s chief Europe adviser Olly Robbins tweeting: ‘Very proud of the government team that worked so hard to support technical talks in Brussels this week. UK proposals for a deep relationship, calmly and professionally presented.’

Chancellor Philip Hammond also said the ‘fantasy’ claim was not ‘particularly helpful’.