The UK must rebuild relations following Brexit, the governor of the Bank of England has said, warning of the economic consequences of leaving the European Union.
Speaking alongside the chancellor at the annual Mansion House dinner in the City of London, Andrew Bailey spoke about the importance of economic growth and outlined the impacts of the UK’s departure from the single market on trade.
While he said he takes “no position on Brexit per se”, he added: “But I do have to point out the consequences”.
“The changing trading relationship with the EU has weighed on the level of potential supply”, Mr Bailey said.
“The impact on trade seems to be more in goods than services, that is not particularly surprising to my mind.
“But it underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people”.
“The picture is now clouded by the impact of geopolitical shocks and the broader fragmentation of the world economy,” the Bank chief added.
The remarks come one week after Donald Trump swept to victory in the US presidential election, with many economists questioning the potential impact of proposals to hike tariffs on all US imports.
Such a move could put pressure on UK goods prices, contributing to rising inflation, experts have suggested. It has also triggered renewed calls for closer ties with the EU.
Last month, Treasury minister Tulip Siddiq warned that 60 per cent of the impact of Brexit is yet to materialise in a damning assessment of Britain’s departure from the European Union.
The Treasury economic secretary cited Office for Budget Responsibility (OBR) forecasts that the economy would shrink by 4 per cent in the long run due to Brexit, as well as warning that Britain’s imports and exports would end up 15 per cent lower than they would be had the UK stayed in the EU.
Rachel Reeves, meanwhile, used her Mansion House speech to argue that restrictions imposed after the 2008 banking crash “went too far”.
In an attempt to regain the trust of the finance sector, Ms Reeves will pledge to ease banking regulations and unveil the first-ever financial services growth and competitiveness strategy.
In his address, Mr Bailey also said the UK has experienced weaker productivity growth since 2008.
“We need to encourage business investment in the UK,” he said.
“So, chancellor, I welcome the plans you have set out in the Budget, and the focus you have placed on public capital investment.”
Ms Reeves’ autumn Budget statement set out £40 billion worth of tax increases to raise cash to pour into schools, the NHS, transport and housing.