The long-term harm to the economy will likely be greater from a no-deal Brexit than from the Covid-19 crisis, the country’s top banker has said.
Bank of England governor Andrew Bailey said the effects of crashing out of the EU on World Trade Organisation (WTO) terms would last for longer than those of the global pandemic.
“I think the long-term effect would be larger than the long-term effect of Covid,” Mr Bailey told MPs on the Treasury Select Committee.
“The models would suggest that the effects of a WTO no-deal trade agreement are longer term. The reason for that is that it takes a lot longer period of time for the real economy to adjust,” he added.
Mr Bailey said: “Covid obviously has a much bigger impact at the moment, in the short run.”
The Covid-19 crisis saw the UK’s economy shrinking by as much as a quarter at one point during the pandemic, as thousands of businesses closed down and were put on Government life support.
The Bank of England’s chief economist Andy Haldane on Monday said that around two-thirds of that loss has been clawed back by the economy.
The resumption of negotiations follows technical discussions over the weekend.
Mr Barnier said: “Time is short. Fundamental divergences still remain, but we are continuing to work hard for a deal.”
The UK leaves the EU’s single market and customs union at the end of the year and without an agreement there could be tariffs and quotas imposed on trade with the bloc.
Any deal would need to be approved by the EU’s leaders and MEPs and reports have suggested an emergency session of the European Parliament could be held as late as December 28 to vote on it.
Problematic issues including fishing rights, the “level playing field” aimed at preventing unfair competition in areas such as workers’ rights and state subsidies and the governance of any deal are yet to be resolved.
Related: Video – Rishi Sunak refuses to rule out no-deal Brexit
