Monday 23 November 2020 6:00 pm

BoE governor Andrew Bailey: No-deal Brexit worse for UK economy than Covid

A no-deal Brexit would leave worse long-term economic scarring than the coronavirus, according to Bank of England governor Andrew Bailey.

Bailey told a Westminster committee today that there was “no question” a no-deal Brexit would be worse long-term than Covid as deadline day for a trade deal draws nearer.

“The long-term effects… I think would be larger than the long-term effects of Covid,” he said.

“It is in the best interests of both sides…for there to be a trade agreement and for that trade agreement to have a strong element of goodwill around it in terms of how it is implemented.”

Trade negotiations are restarting this week over Zoom, after a member of the EU’s negotiating team tested positive for Covid on Thursday.

Time is running short for both sides to close a deal before the UK leaves the EU’s single market and customs union on 31 December.

When asked about whether he is having sleepless nights about negotiations, Bailey told the Treasury Select Committee: “In terms of my sleeplessness nights, which fortunately I don’t have, Covid is obviously a much bigger impact in the short run…but it would be better to have a trade deal, yes – no question about that.”

His comments directly contradict those made by chancellor Rishi Sunak yesterday.

Sunak told the BBC that the coronavirus would have a larger impact than a no-deal Brexit to the UK economy in the short and long-term.

“In the short term specifically and most immediately it would be preferable to have a deal because it would ease things in the short term,” said.

“I think the most important impact on our economy next year is not going to be from that. It’s because of coronavirus. I’m very confident about the British economy in all circumstances, and I think longer term.”

Bailey and Bank of England chief economist Andy Haldane also discussed at the meeting how government restrictions have impacted GDP forecasts.

Haldane’s forecast is for the UK’s GDP to contract by four per cent in the fourth quarter, with “perhaps one-third to a half [being] the incremental effect of the national lockdown”.