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Lord King calls for a “credible fallback”, in case no EU trade deal is reached

The former governor said no deal was “not the first preference of anybody”. He said the government “probably wasted a year” on its contingency plans.

The UK needs a “credible fallback” in case no EU trade deal is reached during Brexit negotiations, former Bank of England governor Mervyn King has said. Lord King said British negotiators needed to show Brussels the country has an alternative over a bad trade deal post-Brexit.

 The former governor, who served between 2003 and 2013, said no deal was “not the first preference of anybody”. He said the government “probably wasted a year” on its contingency plans. The first round of Brexit negotiations at the European Commission ended in July.

Brexit Secretary David Davis said Brussels might delay trade talks due to a lack of progress on the cost of the UK's “divorce” settlement.

Speaking to BBC Radio 4's Today program, Lord King said: “We are where we are, and we are in a negotiation and it's important that the negotiation succeeds.

”But it cannot succeed without a credible fallback position and that is something which I think is a practical thing that the civil service ought to be taking a lead on.“

Previously Prime Minister Theresa May has said: ”No deal is better than a bad deal.“

If the UK left the EU without a trade deal with the 27 other nations it would rely on World Trade Organization rules, and trade agreements between Europe and other countries may not be available to Britain.

On Thursday current governor of the Bank of England Mark Carney announced that uncertainty over Brexit was reducing growth in the British economy. As a result the bank lowered this year's growth forecast from 1.9% to 1.7%.

Carney said: ”Uncertainties about the [UK's] eventual relationship [with Europe] are weighing on the decisions of some businesses.“

Lord King said: ”I don't know what the economic consequences of Brexit will be, that's the only honest answer.”