The Bank of England has issued a fresh set of warnings about the implications of Brexit, reiterating that the UK’s split from the European Union would likely hamper productivity and slow growth.
In its regular inflation report, published after announcing its first interest rate rise in over a decade, the central Bank struck a cautious tone and said that any future increases in rates would largely depend on the nature of Brexit.
“The decision to leave the European Union is having a noticeable impact on the economic outlook,” it said.
“Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly. And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures,” it added.
The Bank of England raised rates by 0.25 per cent to 0.5 per cent on Thursday, but was guarded on where interest rates might go form here, specifically citing Brexit.
It said that the effect of Brexit-related uncertainties, including the subdued outlook for business investment, is likely to weigh further on productivity growth in coming years. And it noted that business investment is projected to grow at a moderate pace, but by less than would have been suggested by global demand and financial conditions alone, “as uncertainty around Brexit weighs on companies’ plans”.
The Bank of England and Governor Mark Carney have repeatedly warned on the risks of Brexit.
Citing sources at the Bank earlier this week, the BBC reported that the Bank projects that up to 75,000 jobs could be lost within the financial services industry as a result of Brexit.
In September, Mr Carney said that households could see “short-term damage” to their finances over the next few years, because of Brexit.
In the third quarter of 2017 the UK economy grew by 0.4 per cent, which was higher than the 0.3 per cent recorded the second quarter, but below the 0.6 per cent growth seen across the eurozone.
The Bank now expects GDP growth over 2017 to be 1.6 per cent, down slightly from its last forecast of 1.7 per cent. It sees growth next year and the year after of 1.6 per cent and 1.7 per cent respectively, unchanged from its previous forecast.
