Bank of England Governor Andrew Bailey has stressed the need for the British economy not to fall into post-Brexit isolationism, according to an interview with Prospect Magazine published on Wednesday.
Brexit has indeed created opportunities, and if we have succeeded in getting most of the (British financial) market and sector to remain in the UK, we will have to work even harder to make sure we do not become isolationist, Ms. .Bailey.
Mr Bailey once again notes the negative short-term consequences of Britain’s exit from the EU. If you reduce the openness of an economy, it will have negative effects in the short term on productivity and growth, he says.
The British Monetary Institute and the members of its Monetary Policy Committee have been denouncing for months the negative impact of Britain’s exit from the EU on foreign trade, productivity and inflation.
On the other hand, for Mr. Bailey, in the longer term, this shock should subside because these trade relations are adjusting to the real economy and we are building new exchanges.
Regarding the City, the engine of the British economy, Mr Bailey describes the financial markets as a global public good and we have a responsibility (…) to provide them with financial stability.
A year ago, British markets were plunged into turmoil by the short-lived government of Liz Truss and its mini-budget with massive and unfunded spending. The BoE had to intervene.
Mr Bailey’s comments also follow detailed proposals by the government last week to relax the rules imposed on its powerful financial sector and stimulate growth. For more than a year, London has been multiplying reform projects to face competition from other European financial centers and take advantage of post-Brexit opportunities.
An emblematic measure notably plans to relax the capital requirements of insurance companies to unlock tens of billions of pounds of investment. Critics fear an increase in risk-taking. The Bank of England (BoE) launched a separate consultation on the subject on Thursday.