Brexit continues to have a negative effect on British foreign trade and weighs on income, worsening the economic crisis in the United Kingdom which is also shaking the rest of the world, said members of the Bank of England (BoE).
There is a long-term effect on productivity, I believe of the order of 3%, noted Wednesday before the Treasury Committee of the British Parliament Andrew Bailey, Governor of the BoE, citing estimates published shortly after the referendum and which, according to him, have not changed.
Six years after the United Kingdom voted to leave the European Union, and almost two years after its effective entry into force, the weight of this decision on foreign trade is added to the successive shocks of the pandemic. and the surge in energy prices caused by the war in Ukraine.
We are seeing a slowdown in trade in the UK much faster than in the rest of the world, said Swati Dhingra, a member of the BoE’s Monetary Policy Committee (MPC).
An international exchange specialist, she believes the Brexit referendum has contributed to higher prices and lower incomes, with real wages she says 2.6% lower than they would have been following the trend before the vote.
BoE members answered questions from parliamentarians as UK inflation hit a 41-year high of 11.1%, well above the bank’s target of 2%.
On Thursday, Prime Minister Rishi Sunak’s government is due to present a budget made up of spending cuts and tax increases.
If we hadn’t had Brexit, we probably wouldn’t need to be talking about an austerity budget this week, criticized former BoE member Michael Saunders, who in a Bloomberg TV interview accused the outlet of the European Union for having done permanent damage to the British economy.
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Since the end of 2021, the BoE has raised rates several times to 3%, a high since 2008, but signaled at its last meeting that it could slow these increases to avoid worsening the recession it already estimates. starts in the UK.
If the BoE met market expectations, which at its last meeting had hoped for more rate hikes, the recession would last eight quarters, she warned.
Over this period, the GDP would fall by 3%, and by a little less than 2% constant rate, commented Mr. Bailey.
UK GDP contracted by 0.2% in the third quarter. It takes two consecutive quarters of decline in activity to be officially in recession.