Bailey Urges UK Government to Boost EU Trade Relations

TLDR

• Brexit may reduce UK’s GDP by 4% according to forecasts.
• Windsor Agreement seen as a step to improve trade ties.
• Further alignment with EU rules could mitigate economic losses.

Bank of England Governor Andrew Bailey has called for the UK government to focus on boosting trade with the European Union. His comments follow economic challenges faced by the UK due to Brexit and changing global trade dynamics. Bailey made these remarks during a speech in Dublin at the Irish Association of Investment Managers.

Bailey highlighted the importance of enhancing the UK’s trade relationship with the EU to improve the country’s economic prospects. He referenced actions taken by the UK government under Prime Minister Keir Starmer, including the Windsor Agreement, as positive steps forward. However, Bailey emphasized the need for further efforts to rebuild trade ties.

Impact on the UK Economy and Brexit Analysis

In his discussion, Bailey cited evidence indicating that Brexit has adversely affected the UK economy by creating trade barriers. According to the Office for Budget Responsibility, Brexit is expected to cause a 4% reduction in the UK’s gross domestic product. In contrast, new government measures are projected to add only 0.2% to GDP by 2040.

Bailey’s remarks underline the need for further government action to mitigate the economic challenges posed by Brexit. He stated, “I take no position on Brexit per se. If the level of trade is lowered by some action, it will have an effect to reduce productivity growth and thus overall growth.” These comments reflect the central bank’s view on the current economic landscape.

Comparisons with Previous Trade Agreements

Bailey also referenced previous trade agreements such as the Windsor Framework, which adjusted the Northern Ireland Protocol. This agreement aimed to improve post-Brexit trading arrangements, although its impact on reducing trade frictions was limited. Studies, such as those from Frontier Economics, suggest that aligning more closely with EU rules could help recover economic losses without rejoining the customs union or single market.

The gradual recovery seen from past agreements supports Bailey’s call for further alignment with the EU. Understanding these dynamics is essential for policymakers to address the ongoing economic issues. Bailey’s comments indicate a strategic direction for future UK-EU trade relations.

Focus on Macro-Economic Factors Over Cryptocurrencies

While Bailey’s statements primarily focus on macroeconomic factors, no direct effects on cryptocurrencies like Ethereum, Bitcoin, or other altcoins were noted. The discussion remained centered on the broader economic conditions driven by trade dynamics between the UK and EU.

No changes in total value locked (TVL), liquidity, or staking flows in the crypto market have been observed in response to Bailey’s statements. The announcement is better understood as a call for strategic alignment and growth in traditional financial markets.

“The evidence on Brexit suggests that the changing trade relationship has weighed on the UK economy by putting up barriers and hampering productivity.”—Andrew Bailey, Governor, Bank of England