Bank of England chief to say UK must ‘rebuild relations’ following Brexit

The governor of the Bank of England will say the UK must “welcome opportunities to rebuild relations” following Brexit, as he backs the Chancellor’s plans to boost business investment and growth.

Andrew Bailey will talk about the importance of economic growth at the annual Mansion House speech in the City of London.

He is expected to say that the UK has experienced weaker productivity growth since the 2008 financial crisis.

“We need to encourage business investment in the UK,” Mr Bailey will tell City bosses and Chancellor Rachel Reeves.

“So, Chancellor, I welcome the plans you have set out in the Budget, and the focus you have placed on public capital investment.”

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Tax increases

Ms Reeves’ autumn Budget statement set out £40 billion worth of tax increases to raise cash to pour into schools, the NHS, transport and housing.

Turning to the impact of foreign trade and investment on productivity, Mr Bailey is expected to say that he takes “no position on Brexit per se”.

“But I do have to point out the consequences,” he will state.

“The changing trading relationship with the EU has weighed on the level of potential supply.

“The impact on trade seems to be more in goods than services, that is not particularly surprising to my mind.

“But it underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.”

“The picture is now clouded by the impact of geopolitical shocks and the broader fragmentation of the world economy,” the Bank chief will add.

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Tariffs

The remarks come a week after Donald Trump won the US presidential election, with many economists questioning the potential impact of proposals to hike tariffs on all US imports.

Such a move could put pressure on UK goods prices, contributing to rising inflation, experts have suggested.

It also raises questions about the UK’s current trade ties with the EU.

Elsewhere in his speech, Mr Bailey will say it is problematic that official data on unemployment has been incomplete in recent months due to responses to the Office for National Statistics’ (ONS) jobs survey.

“It is a substantial problem – and not just for monetary policy – when we don’t know how many people are participating in the economy,” he will say.

“I do struggle to explain when my fellow governors ask me why the British are particularly bad at this.

“The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and improve the quality of UK labour market data.”