Bank of England Warns of Long-term Brexit Impact on UK's Economy
London, Sunday, 19 October 2025.
Governor Andrew Bailey highlights Brexit’s ongoing negative impact on UK growth, citing trade barriers and decreased productivity as long-term challenges.
Brexit’s Economic Strain
Bank of England Governor Andrew Bailey has warned of the prolonged negative effects of Brexit on the UK’s economic growth, citing the erection of trade barriers and reduced productivity as primary concerns. Despite a trade agreement in 2020 allowing tariff-free trade, regulatory frictions have persisted, impacting exports adversely [1][2].
Decline in Growth Potential
The potential growth rate of the UK has decreased from 2.5% to 1.5% over the past 15 years, a decline attributed to multiple factors including reduced productivity growth, an ageing population, and the economic policies post-Brexit [1][3]. These issues underscore the broader economic challenges faced by the UK, with the International Monetary Fund forecasting the highest inflation rates in the G7 for 2025 and 2026 [3].
Impact on Global Trade
Bailey also highlighted that the UK’s situation serves as a cautionary tale for the global community regarding the economic repercussions of trade barriers. He noted that while economies can adapt, the process is gradual, and growth remains restricted in the interim [2]. This perspective aligns with the British government’s Office for Budget Responsibility, which estimates a long-term productivity decline of 4% compared to a scenario where the UK remained in the EU [2].
Future Prospects and Innovations
Amidst these challenges, Bailey suggested that investment in innovation and new technologies, such as artificial intelligence, could offer solutions to the productivity slowdown. This approach aims to harness the potential of AI as a general-purpose technology to counterbalance some of the negative impacts over the longer term [1][3].