Andrew Bailey urges closer EU trade ties to ease Brexit pressure and fight back against Trump’s tariffs
Bank of England Governor Andrew Bailey called on Sir Keir Starmer to move beyond the government’s recent EU “reset” deals and establish deeper trade and financial ties with Brussels, warning that Brexit and Donald Trump’s economic trends and Donald Trump’s revival of trade protectionism pose risks to UK growth.
Bailey welcomed the latest government-EU agreement in Dublin, which reduced customs inspections and aligned the UK food standards with the group. But he said the deal was not enough to deal with the long-term economic challenges facing the UK.
“Just like Windsor’s trade agreement on the UK and Ireland is a welcome step, so is the initiative of the current UK government to rebuild trade between the UK and the EU,” he said. “But we can do more.”
Bailey carefully avoided weighing Brexit politics and said: “I have no position in my own right.” However, he made it clear that its economic consequences (especially in the form of non-tariff barriers) hurt productivity and overall growth.
“If trade levels are lowered through certain actions, it will effectively reduce productivity growth, thus reducing productivity growth. Just as tariffs can reduce trade sizes by increasing costs, so is the type of non-advocacy barriers created by Brexit.”
“This doesn’t mean that Brexit is wrong, because there may be other reasons, but I do show that we should strongly believe that we should do everything possible to minimize the negative impact on trade.”
The governor’s remarks came when Steamer’s administration faced increasing criticism of its EU strategy. The latest reset deal tied the UK to Brussels’ food safety standards and the impact on the European Court of Justice has been labeled as “the worst world of both worlds” by Brexit and some workforce seats. Critics argue that it sacrifices regulatory autonomy without restoring the voting rights of EU institutions.
However, Bailey urged deeper consistency (especially financial services), which is crucial to ensuring London’s role as a global capital market.
“The scale of investment required requires global capital with the support of open financial markets,” he said. “It is effective to improve the openness of financial markets by reducing non-tariff barriers.”
While defending global trade, Bailey also responded to part of President Trump’s diagnosis of global economic dysfunction, describing international trade rules as tense and urgently needed repairs.
He acknowledged that the former U.S. president’s criticism of China’s industrial subsidies and “unsustainable trade imbalances” are not without merits.
“I am a believer in free trade. [but] “The system is under too much pressure. Refuting those who argue for restrictions on trade is just the wrong minds,” Bailey said.
He cited the International Monetary Fund research and found that China has implemented thousands of subsidy programs in key industries, leaning towards global markets and contributing to the erosion of fair trade principles.
Bailey no longer endorses Trump’s tariffs, but he acknowledges that they reflect deeper dysfunctions in the multilateral trading system.
“If people think that tariff action is needed to cause shock and awe to get these issues on the table and deal with it, then there is something wrong with the multilateral system,” he said.
Nevertheless, the governor warned Britain and others to turn inward.
Bailey concluded: “We cannot retreat from global trade. The answer lies in diversification of supply chains among reliable partners who comply with international law.”
His speech could increase momentum, calling for a more pragmatic, economically focused post-Brexit policy, and remain sharp even with political divisions about the future relationship between Britain and Europe.
