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Bank of England Governor Andrew Bailey is urging the government to “minimise the negative impact” of Brexit by seeking closer alignment with the EU.
Bailey on Thursday insisted on reducing non-tariff barriers, particularly in the financial services industry, saying that a lower deficit would boost trade and economic growth.
His comments come after Prime Minister Kiel starmer announced a UK “reset” deal with the EU this month. This includes plans to reduce barriers to local trading, including food and electricity.
In his speech, Bailey welcomed the government’s efforts to increase trade with Europe, but warned that Brexit “heavy” productivity and growth, suggesting that the UK and the EU should seek to further deepen their relationship.
Bailey joined forces with Prime Minister Rachel Reeves in November by calling on Britain to rebuild ties with the EU at a time when fears about the Trans-Atlantic War were rising after Donald Trump won the US presidential election.
Speaking in Ireland, the BOE governor suggested that more could be done to increase UK EU trade in financial services, saying “two-way streets” would deepen the market and benefit both sides.
“There are benefits to increasing openness in financial markets by reducing non-tariff barriers,” he told Financial Services Dinner in Dublin.
Reeves argued that the UK should seek closer business ties with the EU by agreeing to adjust rules between both “mature industries” such as the chemical sector.
Priority allies say the UK-EU reset deal is the starting point for negotiations on closer ties, and the confidence built by the new arrangement could lead to more ambitious moves to boost future trade.
Bailey said that Brexit didn’t say it was “wrong,” but it created a non-tariff barrier. “We should do everything we can to minimize the negative impact on trade,” he said.
He was clear about the benefits of both the UK and EU economies to increase the openness of financial markets by reducing non-tariff barriers, as he challenged the idea that trade was a “one-way” from the UK to the bloc.
“Like commodity trade, open financial markets support economic growth, supporting increased investment and reduced capital costs,” Bailey said.
He added that close cooperation between the UK and the EU is increasingly related to the context of “increasing market volatility” observed following Trump’s tariff announcement.
