Brexit has cost UK economy £80bn - Bank of England

A no-deal Brexit is likely to see interest rates eased says Gertjan Vlieghe
A no-deal Brexit is likely to see interest rates eased says Gertjan Vlieghe

Brexit has cost the British economy at least £80 billion since the referendum and the shock of a no-deal divorce could see interest rates slashed, according to a Bank of England policymaker.

Gertjan Vlieghe, an external member of the central bank’s Monetary Policy Committee, said that, since the June 2016 vote, 2% has been shaved off GDP.

This, he said, amounts to a loss of around £800 million per week, or £40bn per year.

“The analysis suggests that since the vote in June 2016, we have lost 2% of GDP relative to a scenario where there had been no significant domestic economic events.

“That amounts to around £40bn per year, or £800m per week of lost income for the country as a whole,” he told an audience in London.

The rate-setter pointed to a collapse in business investment into the UK, which has been stuck at zero, while in G7 peers it has accelerated to 6% a year.

“Firms have been saying in a number of surveys that the uncertainty about our future relationship with the EU is a source of concern for them that has been weighing on their investment spending, as plans for expansion have, on average, been scaled back,” Mr Vlieghe said.

He also warned that interest rates are more likely to be cut than hiked if Britain crashes out of the European Union without a deal.

“In the case of a no-deal scenario, I judge that an easing or an extended pause in monetary policy is more likely to be the appropriate policy response than a tightening.”