United Kingdom: The Bank of England Believes that Brexit Further Aggravates the Economic Crisis

The Bank of England believes that Brexit further aggravates the economic crisis

BAD EFFECTS: Swati Dhingra, a member of the Bank’s Monetary Policy Committee, says Brexit has ‘contributed to higher prices and lower incomes’

The British are not done suffering the effects of Brexit . Six years after the vote on leaving the European Union, and almost two years after it actually came into force, this decision continues to have a negative effect on foreign trade and weighs on incomes, aggravating in the United Kingdom the economic crisis which is also shaking the rest of the world, said members of the Bank of England (BoE).

“There is a long-term effect on productivity, I believe of the order of 3%”, noted Wednesday before the Treasury Committee of the British Parliament Andrew Bailey, Governor of the BoE, citing published estimates “few time” after the referendum and which, according to him, have not changed. The weight of Brexit on foreign trade comes on top of the successive shocks of the pandemic and the surge in energy prices caused by the war in Ukraine.

The budget is expected this Thursday

“We are seeing a slowdown in trade in the UK much faster than in the rest of the world,” said Swati Dhingra, a member of the BoE’s Monetary Policy Committee (MPC). A specialist in international trade, she believes that the Brexit referendum has “contributed to an increase in prices and a reduction in income”, with real wages according to her “2.6% lower than they would have been in following the trend” before the vote.

BoE members answered questions from parliamentarians as UK inflation hit a 41-year high of 11.1%, well above the Bank’s target of 2%. This Thursday, Prime Minister Rishi Sunak ‘s government is due to present a budget made up of spending cuts and tax increases.

“If we hadn’t had Brexit, we probably wouldn’t need to talk about an austerity budget this week”, had also criticized Michael Saunders, a former member of the BoE, who had accused in an interview to Bloomberg TV the exit from the European Union for having “done permanent damage to the British economy”.

GDP down 0.2% in the third quarter

Since late 2021, the BoE has repeatedly hiked rates to 3%, the highest since 2008, but signaled at its last meeting that it may slow those hikes to avoid deepening the recession it is facing. believes has already begun in the UK. If the BoE met the expectations of the market, which was hoping at the time of its last meeting for more rate hikes, the recession would last eight quarters, she warned. Over this period, “GDP would fall by 3%, and by just under 2% at constant rates”, commented Andrew Bailey. UK GDP contracted 0.2% in the third quarter. It takes two consecutive quarters of decline in activity to be officially in recession.

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