“I think the possibility of a no deal is uncomfortably high at this point,” Carney said in an interview with BBC radio on Friday.
“People will have things to worry about in a no deal Brexit, which is still a relatively unlikely possibility but it is a possibility.”
Carney described a “no deal Brexit” as highly undesirable, noting such a situation would result in a disruption to Britain’s economic activity.
His comments pushed pound to its lowest point against the dollar in eleven days. Sterling slid below $1.30, touching a low of $1.2985.
If Britain cannot agree the terms of its divorce with the bloc and leaves without even a transition agreement, it will have to revert to trading under the World Trade Organization’s rules.
That is something most economists believe would seriously harm the world’s No.5 economy as trade with the EU, Britain’s largest market, would become subject to tariffs.
“Parties should do all things to avoid (a no deal Brexit),” Carney told the BBC.
The deadline for the UK to leave the EU is 29 March 2019. The process of Britain negotiating to leave the EU has been the biggest political hurdle for Theresa May’s government as she has struggled to finalize the unprecedented exit negotiations.
How the UK will leave the EU and what kind of future trade and bilateral relations the two sides will have all have yet to be decided.
May unveiled a plan earlier this month outlining her proposals for an agreement. However, EU officials have rejected key demands, including the future status of the border between EU member Ireland and UK Province of Northern Ireland.