Andrew Bailey, Governor of the Bank of England, has dared to state what no British politician seems willing to say: "Brexit has weighed on the British economy. We must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people" Bailey declared in his annual speech at the Mansion House in London.
"As a public official, I take no position on Brexit per se," he said. But I do have to point out consequences" emphasized the governor. "The impact on trade seems to be more in goods than services".
In fact, Brexit has led to a 27% drop in merchandise exports and a 32% decrease in imports of products to the European Union between 2021 and 2023, according to a recent study by the Aston University Business School. The Office for Budget Responsibility estimates that the impact over 15 years could result in a 4% decrease in GDP.
The warning from the Governor of the Bank of England coincided with the release of less than flattering data on the performance of the economy during the third quarter of 2024 and the beginning of the Labour government under Keir Starmer.Growth slowed to 0.1%, placing the UK in sixth place among the G7, ahead of only Italy and behind Germany, France, and the United States.
The Labour budget, presented at the end of October, has also been met with criticism from the business community due to increased tax pressure and a lack of investment incentives. Treasury Secretary Rachel Reeves is facing harsh criticism and mounting pressure to change course in her economic policy.
In his speech at the Mansion House, Andrew Bailey reminded the Labour government that any growth prospects necessarily depend on "rebuilding relationships" with the EU.
"Our biggest trading partner is the European Union" openly acknowledged Rachel Reeves, who was also present at the event. "We will not be reversing Brexit, or re-entering the single market or customs union. But we must reset our relationship."
However, the Starmer Government has so far been characterized by a complete lack of clarity on what "resetting" relationships means and has, for example, renounced the EU's offer for a youth mobility agreement. The most they have acknowledged is the need for "mutual recognition of professional qualifications" and an agreement on "veterinary products" to eliminate current barriers.
Next year, Starmer will have to renegotiate the Trade and Cooperation Agreement with the EU sealed by Boris Johnson after completing Brexit. The Prime Minister plans to hold a summit with the EU for the occasion.