UK Must Rebuild EU Ties Post-Brexit, Says Bank Governor

UK Must Rebuild EU Relations Post-Brexit, Says Bank Governor

Andrew Bailey, the Governor of the Bank of England, has called for the UK to rebuild its relationship with the European Union while respecting the 2016 Brexit referendum. In a speech at the Mansion House, Bailey highlighted the economic impact of Brexit, emphasizing weaker trade and urging renewed cooperation with the EU.

Brexit’s Economic Consequences

Bailey acknowledged Brexit’s effects on the UK economy, particularly in goods trade, which has been hit harder than services. He warned against focusing solely on Brexit, pointing out broader geopolitical shocks like global fragmentation and potential US tariffs under President-elect Donald Trump.

“Brexit has weighed on the economy,” Bailey stated. “But we must welcome opportunities to rebuild relations while respecting the decision of the British people.”

Government and Industry Voices on Rebuilding Relations

While the government remains opposed to rejoining the EU, Chancellor Rachel Reeves echoed Bailey’s sentiments about resetting relations with the EU. She emphasized maintaining strong trade ties while ruling out re-entering the single market or customs union.

Reeves also outlined plans to merge council pension pots to boost investments, a move criticized as risky by some. “The UK has been regulating for risk but not for growth,” she noted.

Calls for Optimism and Trade Improvements

Other voices, such as Spain’s Finance Minister Carlos Cuerpo, have expressed optimism for a better UK-EU deal. Sir John Gieve, former deputy governor of the Bank of England, suggested incremental agreements to reduce trade barriers, emphasizing the importance of creating an environment where businesses feel confident investing in the UK.

“If we could, in due course, get close to joining the customs union, I think that would be a major help,” Gieve added.

Addressing the UK’s Growth Challenges

Bailey also addressed the UK’s broader economic challenges, pointing to stagnant productivity since the 2008 financial crisis. He highlighted the need for structural reforms, particularly in the fragmented pension system, echoing Reeves’ call for “heavy lifting” to ensure sustainable growth.

Reeves and Bailey emphasized the importance of maintaining the UK’s status as a global financial hub, with plans to publish a financial services strategy in the spring, focusing on fintech, sustainable finance, and capital markets.