Governor Andrew Bailey stopped short of criticising the UK’s departure from the EU but emphasised the need to reduce its economic downsides.
Bank of England Governor Andrew Bailey has called for renewed efforts to deepen the United Kingdom’s ties with the European Union, saying that stronger cooperation, particularly in financial services, would help cushion the economic aftershocks of Brexit and improve resilience amid rising global trade tensions.
Delivering a keynote address in Dublin, Bailey stopped short of criticising the UK’s departure from the EU but emphasised the need to reduce its economic downsides. He said that while the Bank takes no political stance on the decision to leave, the trade dislocation caused by Brexit has weighed on the country’s productivity and growth.
Though the UK formally left the EU in 2020, many of the long-term consequences are still being absorbed, particularly by businesses that rely on cross-border trade and investment. Bailey welcomed the UK government’s ongoing attempts to “reset” its relationship with Brussels, describing such moves as a “step forward” in addressing the trade and regulatory friction that emerged post-Brexit.
The central bank chief has long signalled concern over economic fragmentation, especially in light of mounting geopolitical tensions and the decline of globalisation. In his Dublin speech, Bailey warned that greater barriers to trade and investment would only make it harder for the Bank to maintain price stability. He pointed out that the disintegration of long-established global supply chains has already contributed to the sharp inflationary pressures seen since the COVID-19 pandemic.
“Supply-side shocks have become more frequent and more severe,” he noted. “We can no longer assume the same level of global economic efficiency that prevailed before the pandemic and Brexit. This makes our job of controlling inflation significantly harder.”
The warning comes at a time when inflation in the UK has proven more stubborn than anticipated. The latest figures show consumer price inflation rising to 3.5% in April—up from 2.6% in March—driven largely by increased household bills, including energy, water, and council tax. The Bank’s official target remains at 2%.
Economic fragmentation is also having uneven impacts on different groups within the UK. Data from the Office for National Statistics (ONS) highlights a growing intergenerational disparity. Private renters, especially younger households, have faced inflation rates of 3.6% year-on-year, compared with just 1.8% for those who own their homes outright. This divergence has widened since autumn 2023 and underlines how rising costs are disproportionately affecting those least able to absorb them.
Bailey’s remarks were also framed by broader concerns over escalating trade disputes abroad. On the same day as his speech, former US President Donald Trump intensified his protectionist rhetoric, raising the spectre of a new phase in global trade wars. Such developments, Bailey warned, risk undermining economic efficiency and could ultimately fuel inflation both in the UK and globally.
His comments reflect a growing consensus among UK policymakers that the country’s economic stability may hinge on building pragmatic ties with major trading partners, including the EU. This view has gained traction as Labour Prime Minister Sir Keir Starmer pursues more constructive engagement with Brussels. Earlier this month, Starmer met with European Commission President Ursula von der Leyen in London, reportedly to explore avenues for regulatory alignment and enhanced cooperation in key sectors.
While political appetite for rejoining the EU remains limited, especially among Conservative and Reform UK voters, Bailey’s intervention underscores the urgency of economic realism. A recalibrated relationship with the EU could help ease inflationary pressures, support productivity, and offer more stable conditions for long-term growth.
For now, the Bank of England is left navigating an economy still grappling with post-Brexit adjustment, volatile supply chains, and mounting geopolitical uncertainties. But with inflation staying above target and growth projections subdued, Bailey’s call for closer EU ties may gain renewed relevance in the months ahead.
