Bank of England chief intervenes as EU and UK embroiled in bitter bickering over Brexit

In a speech to economists, Bank of England governor Mark Carney said Brexit negotiations have now entered “the most critical phase”.

He warned if the transition is disorderly, the BoE could be required to take special measures.

Following the 2016 EU referendum the BoE cut interest rates to avert the risk of a downturn in the economy.

Mr Carney said: “From a monetary policy perspective, the bank is ready for Brexit.

“Observers know that, in exceptional circumstances, we are both willing to tolerate some deviation of inflation from target and that there are limits to that tolerance.”

Britain and the EU are entering a key part of Brexit talks and the relationship is currently very strained.

The most recent disagreement comes as the EU plans to exclude the UK from the Galileo satellite navigation system.

As a result of these threats, Britain has said it is prepared to go it alone and create a domestic system to rival the EU’s Galileo project, to the anger of Brussels officials.

Chancellor Philip Hammond said: “We need access to a satellite system of this kind, our plan has always been to work as a core member of the Galileo project, contributing financially and technically to the project.

"If that proves impossible then Britain will have to go it alone, possibly with other partners outside Europe and the US, to build a third competing system."

In addition to this HMRC chief Jon Thompson, said on Wednesday that the “Max Fac” customs plan favoured by Boris Johnson, Michael Gove and Liam Fox, could cost businesses up to £20bn a year.

Mr Carney has come under pressure over his his “forward guidance” over interest rates, which he claims has helped people and businesses to plan for the future while reducing the chances of interest rates experiencing volatile rises.

Investors have accused him of fuelling speculation of an interest rate rise, only for it be later shelved.

On Wednesday this week, Mr Carney come under attack from Brexiteer Jacob Rees-Mogg.

Mr Carney was accused of not “understanding the Brexit process” after he spoke to the Treasury select committee, earlier this week.

Mr Rees-Mogg said: “The Governor of the Bank of England cannot even get his forward guidance on interest rates right which is his main responsibility so his endless crying wolf over Brexit simply discredits him and sadly the Bank.”