Bank of England Governor Andrew Bailey said he hoped a spirit of goodwill would prevail between Britain and European Union countries to smooth over inevitable trade disruptions when a post-Brexit transition period ends on Jan. 1.
Last week the BoE said many smaller British companies appeared unready for the reintroduction of customs checks in under seven weeks’ time, and estimated that border delays were likely to cost Britain 1% of GDP – around 5 billion pounds ($6.55 billion) – in the first three months of next year.
This disruption would be even greater if Britain and the EU failed to reach a trade deal, leading to new tariffs on goods.
Bailey also told a panel discussion with U.S. Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde that he felt “very uncomfortable” at the huge amount of economic uncertainty created by COVID.
“We are living in a world of huge uncertainty and unpredictability, and I don’t like to say that,” he said. “It’s a very, very difficult place to be in.”
Earlier on Thursday, Bailey told a Financial Times event that he was encouraged by the latest COVID vaccine developments, which reduced economic uncertainty.
Bailey told the ECB panel it was encouraging that trade talks were continuing between Britain and the EU, but that he was not in a position to judge the outcome.
“I would hope that if there is a trade agreement there will be a spirit of goodwill around this, and that some of the inevitable changes of processes that will disrupt things in terms of adjustments are managed smoothly,” he said.
“I’d be more concerned if there isn’t a trade deal because … that spirit of goodwill might not be there, frankly,” he added.
Bailey said Britain’s financial sector was ready for the end of the transition period irrespective of a deal, and better prepared than much of the rest of the economy.
“Whether there are further decisions on (regulatory) equivalence or not, I think the financial sector is ready,” he said.