A Bank of England policy maker has warned that a wave of business investment was “stopped in its tracks” by Brexit, dealing a blow to the UK economy worth £1,000 ($1,204) per households.
(Bloomberg) — A Bank of England policy maker has warned that a wave of business investment was “stopped in its tracks” by Brexit, dealing a blow to the UK economy worth £1,000 ($1,204) per households.
Jonathan Haskel, an external member of the Monetary Policy Committee, said that the UK “suffered much more” from its productivity woes since exiting the European Union led to a sharp drop in the pace of business investment.
The remarks are the latest warning from officials at the central bank about the economic impact of Brexit as concern mounts that the UK is headed into a protracted slump. Investment by UK businesses, which have been plagued by uncertainty and weaker trade ties to the EU, has lagged behind previous performance and other countries since Brexit.
Haskel said the “productivity penalty” from Brexit is currently 1.3% of gross domestic product, or about £29 billion in total or £1,000 per household. By the end of the BOE’s forecast period, the penalty will increase to 2.8% of GDP, he added.
“If you look in the period up to 2016, it’s true that we had a bigger slowdown in productivity up to 2016, but we had a lot of investment,” he said in an interview with Matthew C. Klein on the web newsletter, “The Overshoot.”
“We had a big boom between 2012-ish to 2016,” Haskel said. “But then investment just plateaued from 2016, and we dropped to the bottom of G-7 countries.”
The BOE recently said Brexit was part of a potent mix of factors reducing the UK economy’s potential growth. At its February Monetary Policy Report, Threadneedle Street warned that business investment is “very subdued” and that the trade hit from Brexit had happened even sooner than it first feared.
“We suffered much more,” Haskel said in the interview. “A bit of that is that we have this larger financial sector. But I think it really goes back to Brexit.”
“We were at the top of the wave, of investment in 2012. If we pushed that out a little bit, then our slowdown may not have looked quite so bad, but it was stopped in its tracks in 2016.”
(Updates with details from the interview)
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