Blog: Brexit: Bank of England governor fears lack of ‘goodwill’ if there’s no trade deal – Sky News

The governor of the Bank of England has raised fears of a hit to the economy from a lack of “goodwill” if the Brexit transition period ends with no trade agreement.

Speaking at a forum organised by the European Central Bank (ECB), Andrew Bailey said he was encouraged that talks aimed at securing a deal between the UK and EU were continuing.

He warned of inevitable disruption to trade – whatever the outcome of the negotiations – because of adjustments to the rules from 1 January.

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Economic recovery has ‘slowed’ – Chancellor

But he drew a clear distinction about what the lack of a deal would mean.

He said: “I would hope that if there is a trade agreement there will be a spirit of goodwill around this, and that some of the inevitable changes of processes that will disrupt things in terms of adjustments are managed smoothly.

“I’d be more concerned if there isn’t a trade deal because… that spirit of goodwill might not be there, frankly,” he added.

The bank has already forecast a 1% hit to gross domestic product from border delays during the first three months of 2020 – with many small businesses unprepared for the changes ahead.

But he told the panel that the financial services sector was ready for the end of the transition period, irrespective of additional equivalence agreements on regulation with the EU.

Sky News revealed back in June that Mr Bailey had used a call with UK bank chief executives to warn them to intensify their preparations for a no-deal scenario.

Brexit will hit the UK and EU nation economies at a time when the world is hoping for a vaccine-inspired end to the coronavirus crisis.

Mr Bailey told the forum, which included his ECB counterpart Christine Lagarde and Federal Reserve chair Jay Powell, that the bank believed the UK economy was emerging from its biggest shock since the early 18th century.

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It was just a week ago that the bank unleashed a further £150bn of stimulus to support activity as large parts of the economy entered a second period of hibernation under new measures to control the spread of COVID-19.

Mr Bailey told Sky News then about the likelihood of Brexit disruption exacerbating renewed lockdown damage as the bank adjusted its forecasts to predict an 11% plunge in output this year.

Official figures released earlier on Thursday showed the economy remained more than 8% below its pre-crisis peak following the third quarter of the year.

Mr Bailey said he was encouraged by the swift development of drug company Pfizer’s vaccine candidate – with a progress report on Monday that it is more than 90% effective lifting world markets substantially.

Asked what frightened him most as he looked to the future, the governor talked of “unpredictable” events “changing course with incredible speed.”

“We are living in a world of huge uncertainty and unpredictability. I don’t like to see the people of this country… in that position. It’s one that makes me very uncomfortable,” he concluded.

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