Long-term economic damage from no-deal Brexit apt to be worse than pandemic, warns Bank of England

The long-term harm to the economy will likely be greater from a no-deal Brexit than from the Covid-19 crisis, the country's top banker has said.

Bank of England governor Andrew Bailey said the effects of crashing out of the EU on World Trade Organisation (WTO) terms would last for more than those of the worldwide pandemic.

“I think the long-term effect could be bigger than the long-term effect of Covid,” Mr Bailey told MPs on the Treasury Select Committee.

“The models would suggest the effects of a WTO no-deal trade agreement are long term. The reason behind that is that it requires considerably longer time period for the real economy to regulate,” he added.

Mr Bailey said: “Covid obviously includes a much bigger impact right now, within the short term.”

The Covid-19 crisis saw the UK's economy shrinking up to one fourth at some point during the pandemic, as thousands of businesses closed down and were placed on Government life support.

The Bank of England's chief economist Andy Haldane on Monday asserted around two-thirds of that loss has been clawed back by the economy.

‘Time is short’

The resumption of negotiations follows technical discussions over the past weekend.

Mr Barnier said: “Time is short. Fundamental divergences still remain, but we are continuing to work hard for an offer.”

The UK leaves the EU's single market and customs union at the end of the entire year and with no agreement there could be tariffs and quotas imposed on do business with the bloc.

Any deal will have to be accepted through the EU's leaders and MEPs and reports have suggested an emergency session from the European Parliament could be held as late as December 28 to vote onto it.

Problematic issues including fishing rights, the “level playing field” aimed at preventing unfair competition in areas for example workers' rights and state subsidies and the governance of any deal are yet to be resolved.