In a world that is fragmenting, the UK must maintain free trade and a close EU, according to Bailey of the Bank of England

Bank of England Governor Andrew Bailey emphasized the need for Britain to champion free trade and strengthen its relationship with the European Union amid increasing global economic fragmentation. Speaking on Thursday, Bailey hinted at potential implications of a return to the White House by Donald Trump.

Bailey highlighted the importance of open trade to stimulate Britain's lagging investment and boost productivity, alongside measures to release capital from businesses and pension funds, a goal shared by finance minister Rachel Reeves.

Brexit, approved by voters in 2016 and finalized in 2020, has weakened Britain's trade flows and dampened its economic potential, according to Bailey. "As a public official, I do not take a stance on Brexit itself, but it is my responsibility to acknowledge its effects," he stated during the annual Mansion House speech to London's financial services leaders. "This underscores the need to remain vigilant and seize opportunities to rebuild relations while honoring the choice of the British people."

Although the new Labour government has ruled out rejoining the EU's single market or customs union, Prime Minister Keir Starmer aims to enhance trade and diplomatic ties with the EU.

Finance minister Rachel Reeves, who spoke just before Bailey at the event, advocated for a "reset" in Britain-EU relations and expressed her desire to collaborate with Trump to fortify trade partnerships.

Bailey emphasized that Britain must focus on broader growth strategies beyond Brexit. Though he did not explicitly mention the U.S. election, global policymakers are grappling with Trump's victory and the potential imposition of double-digit tariffs on U.S. imports, which could significantly impact global trade and inflation.

"The current landscape is complicated by geopolitical disruptions and the broader economic fragmentation," Bailey noted. "While it is essential to address economic security threats, we must also recognize the importance of openness. We should strive to maintain the safe openness of our economy wherever possible."

Earlier that day, Catherine Mann, a BoE rate-setter and U.S. economist, suggested that the BoE should maintain interest rates until inflationary risks, including those posed by Trump's election, subside.

Bailey voiced support for Reeves' recent public investment plans but agreed with the government's budget forecaster that these measures alone would offer limited long-term growth benefits. "Stronger business investment is needed in addition to good public infrastructure," he concluded.

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.