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The United Kingdom must “rebuild its relations” with the EU “while respecting the decision of the British people” who voted in favor of leaving in 2016, the governor of the Bank of England would later say.
Andrew Bailey's Mansion House speech to investors will mark some of his strongest comments yet on Brexit, saying one of its consequences has been a weakening of trade.
He had previously avoided commenting on the subject due to the Bank's independence from Westminster politics.
“As a public official, I take no position on Brexit per se,” he will say. “But I must point out the consequences.”
Mr Bailey will say the change in relationship with the EU has “weighed” on the economy.
“The impact on trade appears to be more on goods than services… But it highlights why we need to be attentive and welcome opportunities to rebuild relationships while respecting the decision of the British people.”
Mr Bailey will also say the UK should not focus “just on the effects of Brexit”, warning of the “wider fragmentation of the global economy”.
His comments on Brexit go much further than previously on the subject. Last November, he said the move had “led to a reduction in the openness of the UK economy”.
Assessing the impact of the UK's decision to leave the EU on the economy has proven tricky given the multiple economic shocks in recent years.
As a result, the Office for Budget Responsibility and other independent analysts estimate that the economy has shrunk by 4% over the past 15 years.
Trade in goods, notably food and agricultural exports, has been particularly affected by the imposition of new trade barriers. Trade in services, like the banking sector, however, performed better than expected.
The government remains opposed to returning to the EU, but Prime Minister Keir Starmer and some EU politicians have said there could be better relations.
Spanish Finance Minister Carlos Cuerpo told the BBC: “We have to be positive and optimistic that a better deal can be reached on this front.”
A UK government spokesperson said: “We are committed to resetting our relationships with our European partners… and improving our trade and investment relationships.”
Mr Bailey's speech at Mansion House will be accompanied by a speech from Chancellor Rachel Reeves, who will talk about her plans to shake up Britain's pension system for growth.
She wants municipal pension funds to be merged so they can make larger investments and generate higher returns, a move some consider risky.
“The UK has regulated based on risk, but not based on growth,” she will say.
The annual event comes as the government also faces criticism from business for curbing growth through tax increases, which Reeves says are necessary to “properly fund” public services.
“In summary”
Mr Bailey's speech will then address the UK economy as a whole and its lack of growth.
“At the end of the day, it's not a good story,” he will say, describing how productivity has fallen since the economic crash of 2008 and has not recovered since.
He will explain that the UK is not alone in facing this problem, which he says also affects other parts of Europe, but notes that the US has “a better story to tell” .
Mr Bailey will also echo Reeves' concern that Britain's pension system is “fragmented” and requires “a lot of work” to fix.
Former chancellor Jeremy Hunt said there was “much to welcome” in the reforms suggested by Reeves, although shadow chancellor Mel Stride added that the Conservatives would “look closely at the details”.
