Bank of England Governor encourages close ties to EU to help undo Brexit damage
Bank of England Governor Andrew Bailey says the UK can help minimise the negative effects of Brexit by seeking closer alignment with the European Union.
Speaking at the Irish Association of Investment Managers Annual Dinner in Dublin on Thursday, 29 May, Bailey said that as a public servant, he has no position on Brexit itself.
“That said, our evolving trading and regulatory relationship with the EU requires many judgements on the most effective way to do so – what delivers the most effective outcome,” he said.
“Just as tariffs, by increasing the cost, can reduce the scale of trade, the same goes for the type of non-tariff barrier that Brexit has created. Now to reiterate, this does not mean that Brexit is wrong, because there can be other reasons for it, but it does suggest, I think powerfully, that we should do all we can to minimise negative effects on trade.”
The evidence on Brexit suggests that in the UK the changing trade relationship has weighed on the level of potential supply, he said.
“I conclude from this that, just as the Windsor Agreement on trade involving the UK and Ireland was a welcome step forward, so too are the initiatives of the current UK Government to rebuild trade between the UK and EU, and of course there is a very particular important aspect here for the UK and Ireland.”
A relationship which goes both ways
Speaking specifically about financial services, Bailey noted that there is often an impression given that the flow of trade in financial services is predominantly from the UK to the EU.
This creates the notion of a one-way street, and that leads to the image of a dependency, and from there the notion of the dependency in some sense being unhealthy starts to come in, he said.
“My strong view is that – contrary to this one way idea – the relationship goes both ways, and that is a good thing. And, this is very well illustrated by the relationship between Ireland and the UK in the area of financial services.”
He added that the benefits of open financial markets as well as the dependencies also tend to go both ways.
“To repeat, open financial markets are a good thing. As with goods trade, open financial markets support economic growth as well as increasing investment and reducing the cost of capital,” he said.
“So the benefits of open financial markets, as well as the dependencies, tend to go both ways, so a two-way street; and working together effectively is the best way.”
