No-Deal Brexit Would Be Worse for the UK Economy Than COVID-19, Says Bank of England Governor

The long-term economic effects of a no-deal Brexit will be more damaging than those of the coronavirus pandemic, the governor of the Bank of England has said.

Andrew Bailey, governor of the Bank of England, said disturbance to international trade caused by the failure to reach an agreement would not be in the UK’s interests and that it would take a long time for the British economy to adjust to the new trading situations.

The governor’s estimation of a no-deal Brexit contrasts with that of Boris Johnson, who has claimed against evidence that Britain would “prospect mightily” under a no-deal.

Chancellor Rishi Sunak also said this weekend that the UK would “prosper in any eventuality.” Negotiators are running up against the deadline to achieve a deal this month, with sticking points on fishing and state aid rules.

“The long-term effects of no-deal Brexit, I think, would be larger than the long-term effects of Covid,” Mr. Bailey told the Commons Treasury select committee on Monday.

The governor’s revelation comes after an estimation by the London School of Economics and the think-tank the UK in a Changing Europe released in September warned that the economic impact of a no-deal Brexit would be two to three times worse than the pandemic.

The study found that failure to reach a treaty would see a reduction in GDP worth 8 percent over a decade compared with remaining in the EU.

While the Covid-19 pandemic has seen Britain weather a 20 percent fall in GDP in a single quarter, much of the damage is expected to rebound when rules can be lifted.

Despite the looming deadline, No-deal Brexit negotiations are currently taking place by video call only after one of the EU’s negotiating team tested positive for coronavirus, necessitating a period of self-isolation.

Boris Johnson and the European Commission president, Ursula von der Leyen, are expected to speak on the telephone before the weekend, as adherence to a supposed mid-November deadline for striking an accord looks increasingly far-fetched.

Britain technically left the EU early in 2020. It will remain in a transition period until 11 pm on 31 December 2020, when it will leave the single market and customs union and stop following EU rules. The UK and EU are currently negotiating a trade agreement to govern their future relations.