Bank of England warns Brexit will have 'negative impact on UK economy for foreseeable'

The Bank of England governor has warned that Brexit will negatively impact the UK's economic growth "for the foreseeable future." Speaking at the G30 40th annual International Banking Seminar, Andrew Bailey said the country's potential growth rate had declined from 2.5% to 1.5% over the last 15 years. He linked this to lower productivity growth, an ageing population, and trade restrictions, including post-Brexit economic policies.

But Mr Bailey added that the economy is likely to adjust and find "at least partial" balance again in the longer term. "For nearly a decade, I have been very careful to say that I take no position per se on Brexit, which was a decision by the people of the UK, and it is our job as public officials to implement it," he told attendees at the Washington DC event.

"But I quite often get asked a second question: what's the impact on economic growth? And as a public official, I have to answer that question.

"The answer is that for the foreseeable future, it is negative. But over the longer term, there will be - because trade adjusts - some at least partial rebalancing."

The governor's prediction comes as Chancellor Rachel Reeves prepares for next month's budget, where she has been pressured to make further tax rises after official figures showed muted growth in August following a surprise contraction in July.

Referencing the works of 18th century economist and philsopher Adam Smith, Mr Bailey said: "That's the Smithian model: making an economy less open restricts growth over the long term.

"Longer term, you will get some adjustment. Trade does adjust, it does rebuild. And all the evidence we have from the UK is that is exactly what is happening."

The Office for National Statistics (ONS) said gross domestic product (GDP) rose by 0.1% month-on-month in August and fell by 0.1% in July.

In the three months to August, GDP also grew by 0.3%, compared with 0.2% growth in the year to July.

This follows the International Monetary Fund's forecast earlier this week that inflation in the UK is set to surge to the highest level in the G7 in 2025 and 2026.