The governor of the Bank of England has said the UK must do “everything we can” to improve long-term trade by rebuilding ties with the European Union after the historic deal struck with the US.
Piling pressure on the prime minister to prioritise its trade relationship with the bloc, Andrew Bailey urged the government to remedy the “fall-off in goods trade with the EU over recent years”.
It comes ahead of a major EU-UK summit on May 19 - a key part of Sir Keir Starmer’s “reset” mission with the European Union - where the prime minister is expected to push for smoother trading relations with the bloc.
“It is important we do everything we can to ensure that whatever decisions are taken on the Brexit front do not damage the long-term trade position. So I hope that we can use this to start to rebuild that relationship,” Mr Bailey told the BBC.
Asked what impact a closer relationship between the UK and the EU would have on the economy and inflation, the Bank of England governor said: "It would be beneficial. Having a more open economy to trade with the European Union. Because there has been a fall-off in goods trade with the EU over recent years."
His remarks came after a UK-US trade deal was agreed on Thursday, as he said the deal set an example to nations around the world.
While the agreement, which saw tariffs slashed on car and steel imports to the US was hailed by UK ministers as a historic agreement that would save thousands of jobs, pro-EU campaigners argue it won’t be anywhere near as significant as a deal with the bloc, which is the UK’s largest trading partner.
However, it is also unlikely that closer trading ties with the EU would be enough to offset the impact of Brexit on Britain’s economy, with the Office of Budget Responsibility (OBR) estimating that our exit from the EU will reduce productivity by 4 per cent in the long run.
Speaking about the US trade deal, Mr Bailey told the BBC: “It demonstrates that trade deals are important. Trade deals can be done, and the trade is important… honestly, it seems an unpromising landscape at times.
“I hope that we can use these deals to rebuild the world trading system.”
And giving a speech on Friday morning at the Reykjavík economic conference, Mr Bailey urged policymakers to learn lessons from the global instability seen in recent years, stressing that the “global economic environment is likely to continue to be challenging – and less predictable – than it was in the past.”
While he said there is a now a "positive story to tell" as inflation returns to its target level, Mr Bailey warned against complacency and urged policymakers to “adapt and develop to ensure that our processes are nimble and robust”.
Donald Trump unveiled the "historic agreement" with the UK on Thursday, marking the culmination of Sir Keir’s months-long charm offensive towards the US president.
The deal is the first the US has announced since Mr Trump slapped tariffs on countries around the world last month.
Speaking to the prime minister via phone from the White House on Thursday, the US president said the agreement was a “great deal for both countries”.
The deal, which the UK government has said will save “thousands of jobs”, will see car export tariffs slashed from 27.5 per cent to 10 per cent, for a quota of 100,000 UK cars. This, the government said, is almost the total the UK exported last year.
Mr Trump’s 25 per cent tariffs on steel will be axed entirely, while a levy on ethanol, which is used to produce beer, coming into the UK from the US has been removed entirely.
In addition to this, the two governments have negotiated new reciprocal market access on beef, giving UK farmers a tariff-free quota of 13,000 metric tonnes of meat.
But the UK government has insisted that will not result in its strict food standards being watered down after concerns it could open to the door to hormone-injected beef being sold here.
Bill Gates doubles down on criticism of Elon Musk during Stephen Colbert interview
US trade deal a ‘political win’ but will do little for UK growth, say experts
Glitz, glamour and a love of power: How Peter Mandelson won over Donald Trump
Former UK military chief encourages doubling of defence spending
Augustine priest hails ‘icing on the cake’ as one of their own becomes Pope
Environment Secretary accuses Tories of trying to ‘weaponise’ farmer deaths
