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Economic growth

Bank of England Governor Warns of Negative Economic Growth Due to Brexit

Strategic Insights

— 2 min read

Bank of England governor Andrew Bailey has warned that Brexit will have a negative impact on the UK's economic growth "for the foreseeable future." However, he believes that the economy will adjust and find balance again in the longer term. Bailey made these comments at the G30 40th annual International Banking Seminar in Washington, DC, where he also highlighted a decline in the UK's potential growth rate from 2.5% to 1.5% over the past 15 years. This decline is linked to lower productivity growth, an ageing population, and trade restrictions, including post-Brexit economic policies.

Key Takeaways:

  • Brexit will have a negative impact on the UK's economic growth "for the foreseeable future" according to Bank of England governor Andrew Bailey.
  • The UK's potential growth rate has declined from 2.5% to 1.5% over the past 15 years, linked to lower productivity growth, an ageing population, and trade restrictions.
  • Investment in innovation and new technologies, including AI, may help address the decline in productivity growth in the long run.
  • Andrew Bailey has warned that AI may be a risk to financial stability through stretched valuations in the markets but is confident that it is the best hope to address slower growth issues.
  • The Office for National Statistics (ONS) has reported muted growth in August, with GDP rising by 0.1% month-on-month, following a surprise contraction in July.
  • The International Monetary Fund (IMF) has forecasted that UK inflation will surge to the highest in the G7 in 2025 and 2026.

Statistics:

  • The UK's potential growth rate has declined from 2.5% to 1.5% over the past 15 years.
  • GDP rose by 0.1% month-on-month in August and fell by 0.1% in July, according to the Office for National Statistics (ONS).
  • GDP grew by 0.3% in the three months to August compared with 0.2% growth in the three months to July, the ONS said.
  • The International Monetary Fund (IMF) has forecasted that UK inflation will surge to the highest in the G7 in 2025 and 2026.

Sources:

  • Andrew Bailey's comments at the G30 40th annual International Banking Seminar in Washington, DC (References: Bank of England governor Andrew Bailey speaks at G30 40th Annual International Banking Seminar)
  • Office for National Statistics (ONS) report on GDP growth (References: Gross Domestic Product (GDP), Office for National Statistics (ONS))
  • International Monetary Fund (IMF) forecast on UK inflation (References: International Monetary Fund (IMF), UK inflation forecast)

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