Bank of England boss says no-deal Brexit worse than Covid

Governor of the Bank of England, Andrew Bailey - Credit: PA

Bank of England governor Andrew Bailey has warned that a no-deal Brexit would cause more economic harm to the UK than the effects of Covid-19.

Bailey said a failure to agree to a Brexit deal before the end of the transition period would wreak havoc on cross-border trade and damage the chances of a future economic partnership between Westminster and Brussels.

Speaking to the Commons treasury committee, Bailey said that although lockdown and the pandemic were having an impact on the economy, the long-term effects of a no-deal scenario “would be larger than the long-term effects of Covid”.

He added: “It would be better to have a trade deal, yes, no question about it.”

Bailey also said that it was in the “best interests of both sides, for the UK and the EU, for there to be a trade agreement”.

The governor’s remark comes after reports prime minister Boris Johnson is set to intervene in Brexit talks.

Johnson is expected to discuss contentious trade points and the state of negotiations in a phone call with Ursula von der Leyen, president of the EU Commission, this week.

It also comes after chancellor Rishi Sunak said over the weekend that Britain could not accept an EU trade deal at any price and that the UK economy would “weather” the effects of a no-deal.

In September, the London School of Economics and UK in a Changing Europe concluded that the long-term economic impact of a no-deal Brexit could be two or three times worse than that of the pandemic.

Asked about the modelling, Bailey said it would take “a much longer period of time” for the economy to “adjust to the change in openness and change to the profile of trade”.